RBI Takes Emphatic Stand, Keeping Repo Rate Unchanged Was Expected: Experts
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The rate increase cycle was paused in April last year after six consecutive rate hikes, aggregating to 250 basis points since May 2022. (Representative image)
The decision to keep the rate at 6.5 per cent was taken with a 4-2 majority in the six-member MPC.
Experts noted that the Reserve Bank of India’s (RBI) decision to maintain the key policy rate was in line with expectations. On Thursday, the central bank announced that it would keep the rate unchanged for the ninth consecutive time, citing ongoing concerns over stubborn food inflation.
Announcing the third bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent.
The rate increase cycle was paused in April last year after six consecutive rate hikes, aggregating to 250 basis points since May 2022.
Bandhan Bank Chief Economist and Head of Research Siddhartha Sanyal said the status quo on the key (repo) rate is not a surprise.
The central bank was emphatic to underscore the commitment to further disinflation and is in no hurry to cut rates, he said.
While the RBI closely watches the heightened volatility in financial markets globally, it has rightly avoided a knee-jerk reaction, Sanyal said.
The decision to keep the rate at 6.5 per cent was taken with a 4-2 majority in the six-member MPC.
Equirus Securities economist Anitha Rangan said the decision to keep the rate unchanged was taken given the domestic inflation led by the food side.
“RBI is not going to ignore food inflation. According to the central bank, the pace of inflation is moderating but the moderation is uneven and slow. Therefore patience is required,” she said.
Sachin Bajaj, EVP and Chief Investment Officer at Max Life Insurance also highlighted, “That the outcome of the MPC meeting was in line with our and the market’s expectations.”
VP Nandakumar, MD & CEO, Manappuram Finance, too felt MPC’s decision to keep the repo rate unchanged did not come as any surprise as the rate-setting committee once again reiterated its stand on containing inflation without sacrificing growth.
“The key takeaway from the Policy is that a rate cut may be three or four quarters away depending on evolving headline inflation print and economic growth,” Nandakumar added.
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