The Reserve Bank of India (RBI) left the benchmark repo rate unchanged at 6.50% as expected. RBI remains in a wait-and-see mode. There is no urgency to alter policy in any direction at this juncture. The economy is on track to expand by 7% in 2023.

RBI also upgraded the forecast for the current fiscal year 2023-2024 to 7% from 6.5% previously. At the same time, inflation is well-controlled, as there are no signs of uncontrolled demand-led or input-cost inflation. Headline inflation is expected to average around 5.7% this year and should hold around 5% in Q4 2023. This is within RBI’s 2-6% target range.

Lower oil prices should aid INR sentiment and help to contain import inflation. Overall, RBI will be content to see a stable INR.