MUMBAI- The Reserve Bank of India kept its key lending rate steady for a fourth consecutive policy meeting on Friday, as widely expected, but signaled it would keep rates high and liquidity tight to bring inflation closer to its 4 percent target.
India’s benchmark bond yield jumped the most in 14 months on the central bank’s tough stance on inflation and its surprise comments that it was considering bond sales to sop up any excess funds in the financial system.
The country’s monetary policy committee (MPC) kept the repo rate unchanged at 6.50 percent , in a unanimous decision. Most economists polled by Reuters had expected it to keep rates steady.
It has raised rates by 250 basis points (bps) since May 2022 in a bid to cool surging prices.
“Monetary policy needs to remain actively disinflationary at the current juncture,” RBI Governor Shaktikanta Das told a press conference.
The RBI also maintained its policy stance of “withdrawal of accommodation” to ensure inflation progressively aligns with the committee’s target while remaining supportive of economic growth.
A move to a neutral policy stance can only be considered when inflation aligns with the target in a “durable” manner, Das said. Five of six committee members voted in favor of the stance.
The impact of past rate hikes is still to be fully felt across the economy, Das said.
Annual retail inflation eased to 6.83 percent in August, from a 15-month high of 7.44 percent in July, but remained well above the central bank’s 2 percent -6 percent comfort band. However, core inflation, excluding food and oil, dropped below 5 percent. – Reuters
