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.