FX.co ★ India's Central Bank Pauses Rate Hike

India's central bank decided to leave its key interest rates unchanged and to focus on withdrawal of accommodation to balance inflation and growth.

The monetary policy committee of the Reserve Bank of India unanimously voted to keep the policy repo rate unchanged at 6.50 percent. Markets widely expected a quarter-point increase.

The bank has raised the policy repo rate cumulatively by 250 basis points in the last eleven months starting May 2022.

The standing deposit facility rate remained unchanged at 6.25 percent and the marginal standing facility rate and the Bank Rate at 6.75 percent.

RBI Governor Shaktikanta Das said the bank will keep a strong vigil on the evolution of inflation and growth and will not hesitate to take further action as may be required in upcoming meetings.

"Overall, inflation is above the target and given its current level, the present policy rate can still be regarded as accommodative," Das said.

The MPC voted 5-1 to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.

The RBI downgraded its inflation forecast for 2023-24 to 5.2 percent from 5.3 percent.

The governor said economic activity remains resilient and real GDP growth is expected to have been 7.0 percent in 2022-23. At the same time, real GDP growth for 2023-24 was projected at 6.5 percent, which was revised up from 6.4 percent.