RBI keeps interest rates steady, moves to neutral by Investing.com

Investing.com– The Reserve Bank of India left interest rates unchanged as expected on Wednesday, but switched to a neutral stance, opening the door for a potential rate cut in the coming months.

The RBI kept its rate at 6.5% for the 10th consecutive meeting, with five out of six members of the rate-setting committee voting in favor of a hold.

RBI Governor Shaktikanta Das said the central bank will continue to watch inflation closely and that inflation will remain sticky in the coming months.

But he struck a less solicitous tone than seen in previous meetings, especially as the RBI’s shift to a neutral stance signaled the bank is now moving away from a sustained withdrawal of accommodative policy.

“The prevailing and expected balance of inflation growth created favorable conditions for a shift in the monetary policy stance to neutral. Even as there is greater confidence in navigating the last mile of disinflation, significant risks to inflation due to adverse weather events, geopolitical conflicts and rising commodity prices continue to loom over us,” Das said in a live feed.

A Reuters poll ahead of the meeting showed some economists were positioning for the RBI to move to a neutral stance and that the RBI could cut rates by 25 basis points during its December meeting.

The RBI’s Das said India’s growth story “remained intact” and that while inflation has eased in recent months, it is expected to remain above the RBI’s annual target of 4 percent. But he noted that the risks were evenly balanced.

Das said the CPI print for September is expected to see a “big jump” largely due to food prices. But inflation is expected to ease in the coming quarters, citing a good crop yield.

Despite high rates and sticky inflation, India is still among the world’s fastest-growing economies, posting about 7 percent of gross domestic product growth for three consecutive years. But this growth is now expected to moderate, especially amid softening conditions in global economies.