(Reuters) – The Reserve Bank of India’s key lending rate was held steady at a fourth consecutive policy meeting on Friday, as widely expected, with investors more focused on the regulator’s liquidity management plan amid a resurgence in inflation.
The country’s monetary policy committee (MPC) kept the repo rate unchanged at 6.50%, in a unanimous decision. Most economists polled by Reuters had expected it to keep rates steady.
It has raised rates by 250 basis points (bps) since May 2022 in a bid to cool surging prices.
COMMENTARY:
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“The MPC, on expected lines, delivered a status quo policy both on rates and stance. We expect the MPC to maintain a prolonged pause while using liquidity tools more frequently to manage the stance given the volatile global environment.”
SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI
“The RBI’s decision to pause along with retaining the withdrawal of accommodation stance was in line with expectations.”
“Importantly, the RBI has explicitly highlighted the need to use OMO sales to modulate liquidity. This will weigh down bond markets’ sentiments.”
“Concerns on food inflation were highlighted, which can impart upside to headline inflation. We believe that inflation risks remain on the upside, given weather-related impact as well as commodity prices. Global monetary conditions will also weigh on RBI’s policy decisions.”
“The good part is that growth remains resilient and core inflation remains under check. We maintain our call for a prolonged pause on repo rate at 6.5% well into FY25 while liquidity over the medium term will be aimed at being close to neutral.”
(Reporting by Hritam Mukherjee in Bengaluru; Editing by Savio D’Souza)
