The Reserve Bank of India (RBI) surprised markets by holding its key repo rate steady on Thursday after six consecutive hikes, saying it was closely monitoring the impact of recent global financial turbulence on the economy.
The central bank said its policy stance remains focused on “withdrawal of accommodation”, signalling it could consider further rate hikes if necessary, but a number of economists now expect the central bank to remain on hold.
It is a pause, not a pivot,” RBI Governor Shaktikanta Das said at a media conference after the monetary policy announcement.
The monetary policy committee (MPC), comprising three members from the central bank and three external members, retained the key lending rate or the repo rate (INREPO=ECI) at 6.50%.
Most analysts had expected one final 25 basis point hike in the RBI’s current tightening cycle, which has seen it raise the repo rate by a total 250 bps since May last year.
We expect the RBI to maintain an extended pause and evaluate the lagged impact of previous rate hikes and global uncertainties on growth-inflation dynamics,” said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank.
Some other central banks, including in Canada, Australia and Indonesia, have similarly paused, while the U.S. Federal Reserve, Bank of England and the European Central Bank have indicated they may pause, to assess the impact of past hikes and banking sector turmoil on growth and inflation.