RBI holds rate again, shifts stance gear to neutral

Das says inflation-growth balance well-poised; rates may start falling from Dec

- MANOJIT SAHA

The reconstituted six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday decided to keep the policy repo rate unchanged for the 10th straight review meeting while altering the stance -- for the first time since the rate-hiking cycle started in May 2022 -- to "neutral".

The growth-inflation projections for this financial year, however, were unchanged.

The central bank, which was focusing on bringing price rise in control since the onset of the Russian invasion of Ukraine in February 2022, will be mindful of both growth and inflation as the stance change indicates, amid looming fears of slowdown in economic activity.

Market participants now expect the stance change will be followed by a rate cut as early as in December, when the next policy review meeting takes place.

Five members of the MPC voted for the status quo in the policy repo rate while external member Nagesh Kumar voted for a 25 basis point reduction. All the members were unanimous on the stance change.

While changing the stance, the MPC remained "unambiguously" focused on a durable alignment of inflation with the target while supporting growth.

All the internal RBI members were not ready for the "neutral" stance in the August policy. They were in favour of continuing with the "withdrawal of accommodation" stance.