India Leaves Key Interest Rate on Hold, Keeps Neutral Stance

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessRBI Holds Rates as Inflation Outlook Improves, Growth Stays FirmThe Reserve Bank of India kept its benchmark rate unchanged for a fourth straight review, predicting inflation will ease further and growth remain resilient even as it monitors the impact of higher energy prices from the Iran war.Author of the article:Anup Roy and Ruchi BhatiaLast updated 0 minutes ago You can save this article by registering for free here. Or sign-in if you have an account.iyfcc)ub4c(]9bc{h00iox(a_media_dl_1.png India's Ministry of Statistics a(Bloomberg) — The Reserve Bank of India kept its benchmark rate unchanged for a fourth straight review, predicting inflation will ease further and growth remain resilient even as it monitors the impact of higher energy prices from the Iran war.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe six-member monetary policy committee, headed by Governor Sanjay Malhotra, voted unanimously on Wednesday to hold the repurchase rate at 5.25%, as widely expected. The committee also retained its neutral policy stance with inflation holding well within the RBI’s 2%-6% tolerance band.There are still “little signs of generalization of price pressures so far,” Malhotra said in a televised statement from the RBI headquarters in Mumbai. “There is a need for greater clarity to emerge, especially regarding inflation, its path and composition before taking any policy action.”Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThe RBI has stood apart from many regional peers by keeping interest rates unchanged since the conflict in the Middle East began, even as counterparts from Japan to Australia and Indonesia tightened policy. The RBI views the war as a temporary supply shock, arguing monetary policy should respond only if higher energy costs trigger more broad-based inflation. With growth remaining among the strongest of any major economy and inflation still within the RBI’s comfort zone, the central bank has room to wait.Yields on benchmark 10-year government bonds were trading 3 basis points lower at 6.78% while the rupee was 0.3% stronger at 95.1062 per dollar.“The policy tone is cautious but constructive,” said Madhavi Arora, an economist at Emkay Global Financial Services Ltd. “We expect no rate hikes this year.”Attention will now shift to next Wednesday when retail inflation for July will be released. In June, the figure breached the RBI’s 4% target for the first time in 17 months.Malhotra said the headline number will likely rise further in the near term, before peaking in the third quarter, driven largely by food and fuel costs. “It is not getting broad based. Core inflation continues to remain moderate,” Malhotra said. “The MPC underscored that it will maintain a close vigil and remain resolute in its commitment to align inflation with the target.”The RBI slightly lowered its inflation forecast for the year through March to 5% from 5.1% previously.Before the RBI’s next meeting in October, policymakers will have a reading on the economy, with gross domestic product data due on Aug. 31. Growth had accelerated to 7.8% in the January-March quarter, keeping India among the world’s fastest-growing major economies.The RBI narrowly upgraded its GDP growth forecast to 6.7% for the year-ending March 2027, from its previous estimate of 6.6%.“The RBI remains data dependent, and they will be watching underlying inflation momentum to determine if any policy action is needed,” said Sonal Varma, chief economist for Asia ex-Japan at Nomura Holdings Inc. “In our view, the RBI’s inflation forecasts are still on the higher side, and will get revised down further in the next meeting in October.” This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Nomura expects the RBI to stay on hold through March 2027.Risks to the outlook persist, however. The finance ministry warned last week that inflation was broadening beyond food. Separately, India’s largest consumer goods companies are preparing a second consecutive round of price increases as they pass on higher input costs.Rainfall remains deficient in parts of the country, and the area planted with key crops including rice and pulses continues to lag last year’s levels. Food is the largest component of India’s consumer price index. The war in Iran is also raising the risk of imported inflation, given India imports roughly 90% of its crude oil needs. The rupee, meanwhile, remains among Asia’s worst-performing currencies this year despite measures introduced in June to attract foreign-currency inflows. Those steps have brought in more than $40 billion and helped cushion the currency’s decline, but pressure is likely to persist as geopolitical tensions keep the dollar strong.(Adds economist comments, updates market reaction.)Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.