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 latest decision was made within a context of slower global growth, an anticipated early end to global central bank tightening, resilient domestic demand and moderating inflation rates within RBI’s bands. 

Outlook – While the possibility of further rate increases remains on the table, we see a high likelihood of the RBI extending its rate pause in the subsequent meetings, after cumulative rate hikes of 250 bps since May 2022. The RBI noted its concerns of downside risks to outlook including weak global demand, volatility in global financial markets, geopolitical tensions and supply chain fragmentation. However, one concern is that domestic inflation rates could see upside pressures ahead due to supply disruptions as a result of adverse weather conditions. The next MPC meeting is scheduled for 4-6 Oct 2023.