Reserve Bank of India Maintains Interest Rates

Investing.com– The Reserve Bank of India left interest rates unchanged, as widely expected, on Wednesday but shifted to a neutral stance, opening the door for a potential rate cut in the coming months.

The RBI kept its policy repo rate at 6.5% for a tenth consecutive meeting, with five out of six members of the rate-setting committee voting in favor of holding the rate.

RBI Governor Shaktikanta Das stated that the central bank would continue to monitor inflation closely, acknowledging that inflation was likely to remain sticky in the upcoming months.

However, he adopted a less hawkish tone than in previous meetings, and the shift to a neutral stance indicated a move away from prolonged withdrawal of accommodative policy.

> "The prevailing and the expected inflation growth balance have created congenial conditions for a change in monetary policy stance to neutral. Even as there is greater confidence in navigating the last mile of disinflation, significant risks to inflation from adverse weather events, geopolitical conflicts, and increases in certain commodity prices continue to confront us," Das said in a livestream.

A Reuters poll before the meeting showed some economists predicting the RBI might shift to a neutral stance and potentially cut rates by 25 basis points during its December meeting.

Das remarked that India's growth story remains intact. While inflation has decreased in recent months, it is still projected to exceed the RBI's 4% annual target. He pointed out that risks were now evenly balanced.

Das anticipated a “big jump” in the CPI print for September due to rising food prices. However, inflation is expected to decline in the upcoming quarters, thanks to good crop yields.

Despite high interest rates and persistent inflation, India continues to be one of the fastest-growing economies globally, with a GDP growth rate around 7% for three consecutive years. This growth, however, is expected to moderate amid softening conditions in global economies.