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RBI Pause To Policy Rate Hike Is Prudent, Say Experts
RBI decision of continuing focus on withdrawal of accommodative stance and keeping repo rate unchanged was in line with IMC expectation considering resilience shown by economy
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The Reserve Bank of India (RBI) has decided to keep the key benchmark interest rate - the repo rate - unchanged at 6.5 per cent with readiness to act should the situation so warrant, Governor Shaktikanta Das announced on Thursday, after a two-day monetary policy (MPC) meeting.
Five out of six members of MPC voted to remain focused on the withdrawal of accommodation to ensure inflation aligns with the target while focusing on growth, RBI Governor Shaktikanta Das said on Thursday.
Here is what experts are saying about the development:
Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities said, "The decision to pause at 6.5 per cent was a positive surprise. We believe the RBI is concerned about the uncertainty from global financial markets and the pause is reflective of this concern. We view this policy as a hawkish pause. The tone of the policy remains concerned with inflation, especially core inflation and remains focused on reaching the 4 per cent target over the medium term. The RBI remains comfortably on the growth front, for now."
Anant Singhania, President, IMC Chamber of Commerce and Industry said, "MPC of RBI decision of continuing focus on withdrawal of accommodative stance and keeping the repo rate unchanged was in line with IMC expectation considering resilience shown by the economy, robust macroeconomic fundamentals, forex at comfortable level and projection of softening of inflation in 2023-24."
Indranil Pan, Chief Economist, Yes Bank said, "Pausing its rate hiking cycle, the RBI clearly takes into consideration a likely moderation in the inflation going forward. The Governor mentions recent surveys that indicate a reduction in cost concerns and a drop in household inflation expectations. Oil price projections have been lowered and a good rabi harvest factored in the build-out of the future inflation trajectory. Keeping an eye on the evolving global financial stability concerns, the RBI preferred to pause to take stock of the impact of the 250 bps rate hikes that it has already done over the past 11 months."
She further added that the Governor indicated that “the war against inflation has to continue” and that the RBI is keenly intent on seeing the inflation within the target band. Any inflation shocks in the future thus remain on close watch.
Narinder Wadhwa, President, Commodity Participants Association of India said, "As expected RBI has taken a pause in policy rate decision which is a welcome move. Foreign currency reserves reaching again to 600 Billion level is encouraging news . We expect an extended pause and feel the interest cycle is done. MPC today has taken a unanimous decision to keep the policy rate unchanged. Repo rate is unchanged at 6.5 with inflation projections at 6.2 per cent and GDP projections at 6.5 per cent. MPC emphasised focusing on the withdrawal of accommodation. The market cheers on this decision of RBI."