India’s central bank holds rates, as expected

MUMBAI  -India’s central bank kept its key lending rate steady for a second straight policy meeting on Thursday, as widely anticipated, as it looked to assess the impact of past rate increases amid 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 steady at 6.5 percent in a unanimous decision.

All 64 economists in a Reuters poll taken between May 16 and 29 expected no change in rates.

The RBI’s policy stance was maintained as “withdrawal of accommodation” to ensure inflation progressively aligns with the committee’s target while remaining supportive of growth, Governor Shaktikanta Das said while announcing the MPC’s decision.

“Our goal is to achieve the inflation target of 4 percent and keeping inflation within the comfort band of 2-6 percent is not enough,” Das said.

The committee will act “promptly” and as required to keep inflation expectations anchored, Das said.

India’s hold on rates contrasts with recent central bank actions elsewhere.

Two major central banks – the Reserve Bank of Australia and the Bank of Canada, have surprised markets this week by resuming rate hikes to combat stubbornly high inflation, pushing up bond yields across developed markets.

The Indian central bank sees growth in 2023/24 at 6.5 percent while retail inflation is seen averaging 5.1 percent, Das said.

“Domestic macroeconomic fundamentals are strengthening,” he said.

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