Monetary policy must continue to be actively disinflationary, RBI Governor Shaktikanta Das said in his statement
India’s key rate was left unchanged for a sixth straight meeting on Thursday, as inflation remained above the central bank’s 4% medium-term target while economic growth continued to be resilient.
The six-member monetary policy committee(MPC), consisting of three Reserve Bank of India (RBI) and three external members, left the key repo rate, opens new tab unchanged at 6.50% after having raised it by 250 basis points between May 2022 and February 2023.
Monetary policy must continue to be actively disinflationary, RBI Governor Shaktikanta Das said in his statement.
Five out of six members voted in favour of the rate decision.
This is the first bi-monthly policy following presentation of Interim Budget 2024-25 last week.
Annual retail inflation picked up to 5.69% in December from November’s 5.55%, well above the 4% target.
However, a sustained fall in core inflation and a fiscally prudent budget have raised expectations of a possible change in the RBI’s monetary policy stance.
Traders will scrutinise Das’ speech to get a sense of the timeline for a policy pivot while any measures to ease tight cash conditions in the banking system will also be key.
In December, the Consumer Price-based Inflation (CPI) stood at 5.69 per cent.
The government has mandated RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.
Radhavi Deshpande, president & chief investment officer, Kotak Mahindra Life Insurance Company said “As expected the MPC continued its stance with no change in interest rates and highlighted MPC’s CPI target rate at 4% as well as indicated uncertainty on food inflation outlook along with measures to ensure appropriate liquidity. We see 10-year G-Sec back to tracking demand supply dynamics, post today’s announcement and steeper curve can wait a little longer with yields ranging from 7% to 7.15%.”
Meanwhile the market will expect RBI to closely watch global and domestic data along with a close vigilance on food prices and ensure adequate liquidity,he said.
Niraj Kumar, chief investment officer, Future Generali India Life Insurance commented that the overall the MPC continues to reprioritize inflation target head-on and distinctly indicates rate change in the near term is unlikely, given that growth likely to remain resilient and inflation though benign, would still be above the target.”
MPC has delivered ‘Complementary Policy’ in the backdrop of a prudent fiscal budget and largely comfortable global narrative. The policy verdict continues to demonstrate its key focal point being policy stability and achieving inflation target of 4% on a durable basis. It remains sanguine on growth and hence continues to remain vigilant on achieving its inflation target. From liquidity standpoint as well, MPC reiterates its tight liquidity stance to ensure better transmission of prior rate hikes, he added.