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RBI gears up to neutral stance, flags rate cut in near future
For now, apex bank maintains status quo on repo at 6.5% for 10th time in a row; Firm on 7.2% growth this fiscal
Mumbai: Reserve Bank of India (RBI) kept its key interest rate unchanged on Wednesday but took the first step towards a rate cut as it eased its relatively hawkish policy stance to ‘neutral’.
The monetary policy committee (MPC), which included three RBI officials and an equal number of new external members, voted five-to-one to keep the benchmark repurchase or repo rate - which governs the interest rate of home, auto, corporate and other loans - at 6.5 per cent for a 10thstraight policy meeting. The panel, however, unanimously decided to change the policy stance to ‘neutral’ - the first since June 2019 - from ‘withdrawal of accommodation’ amid signs of a slowing economy. Interest rates were last changed in February 2023 when they were hiked to 6.5 per cent from 6.25 per cent.
RBI Governor Shaktikanta Das said the committee changed the stance, but will remain unambiguously focused on the durable alignment of inflation to target, while supporting growth. Food inflation, he said, may ease in coming months, while the core inflation, which excludes the volatile food and energy costs, appears to have bottomed out. India’s economic growth outlook remained intact, with private consumption and investment growing in tandem. The change of stance signals a possible move to cut interest rates in forthcoming MPC meetings, the next being due in early December.
RBI will join other central banks in a policy pivot that was led by the US Federal Reserve easing rates last month. Annual retail inflation eased below the central bank’s target of 4 per cent for a second consecutive month in September and will, as per RBI expectation, rebound again this month, largely due to base effects.
