India: RBI could extend its pause – UOB
|Head of Research at UOB Group Suan Teck Kin, CFA, comments on the latest interest rate decision by the RBI.
Key Takeaways
The Reserve Bank of India (RBI) at its latest Monetary Policy Committee (MPC) meeting left its policy stance unchanged, as widely expected. The benchmark repo rate is maintained at 6.50%, which has stayed unchanged since the surprise pause at the Apr policy meeting. Cash reserve ratio has also been left intact at 4.50%. The decision was unanimous.
Between May 2022 and Apr 2023, RBI had increased the repo rate by 250 bps, and the MPC voted 5-1 to stay focused on the “withdrawal of accommodation” as the transmission of rate hikes is still “incomplete”. The latest decision was made within a context of resilient domestic demand, recent spikes in inflation rates with geopolitical tensions, volatile financial markets and energy prices, and adverse weather conditions adding to the mix.
Outlook – While the possibility of further rate increases cannot be excluded, we see a high likelihood of the RBI extending its rate pause in the subsequent meetings as the attention is now turned to the withdrawal of liquidity to ensure growth is supported. The next MPC meeting is scheduled for 6-8 Dec 2023.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.