The RBI‘s policy stance has been maintained as “withdrawal adjustment” to ensure that inflation gradually adjusts to the committee’s target while continuing to support growth.
India’s central bank kept its key interest rate steady for a second policy meeting on Thursday, as widely expected, as it sought to assess the impact of past rate hikes in slowing inflation.
The Monetary Policy Committee (MPC), which has three members from the Reserve Bank of India (RBI) and three external members, kept the repo rate at 6.50% in a unanimous decision.
All 64 economists polled between May 16 and 29 expected no rate change.
The RBI’s policy stance has been maintained as “withdrawal of accommodation” to ensure that inflation gradually aligns with the committee’s target while supporting growth, Governor Shaktikanta Das said while announcing the MPC’s decision.
Governor Shaktikanta Das said “We aim to achieve the inflation target of 4% and keeping inflation in the comfort zone of 2-6% is not enough, committee will act “immediately” and as needed to keep inflation expectations anchored”.
India’s hold on rates contrasts with recent central bank moves elsewhere. The Reserve Bank of Australia and the Bank of Canada surprised markets this week by resuming rate hikes to combat stubbornly high inflation, pushing up bond yields in developed markets.
India’s central bank expects growth to reach 6.5% in 2023/24, while retail inflation will average 5.1%, Das said. “Domestic macroeconomic fundamentals are strengthening,” he said.
