RBI MPC decision to keep key rates unchanged on expected lines: Experts

RBI left its key interest rate unchanged for the fifth consecutive meeting, citing a potential resurgence in inflation and signalling that price stability remained its primary objective

Top bankers and economists on December 8 said that the Reserve Bank of India (RBI)-led Monetary Policy Committee's (MPC) decision to hold rates steady is on expected lines. Additionally, they said that the central bank is expected to keep rates on hold for a prolonged period.

“The decision of the central bank to keep policy rates unchanged is in line with expectations. Domestic economic activity is holding up well as assessed by the RBI and the MPC remains alert and prepared to undertake appropriate policy actions as warranted,” said Suresh Khatanhar, Deputy Managing Director, IDBI Bank.

Going ahead, Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said that the central bank is expected to maintain the status quo.

Also read: RBI declares reversal of liquidity facilities on weekends, holidays from Dec 30

“We continue to expect prolonged pause by the MPC, with liquidity tools being more closely linked if necessary to manage the policy stance,” said Bhardwaj.

Whereas Pralay Mondal, managing director and chief executive officer (MD and CEO), CSB Bank said that the central bank’s move to create a fintech repository and increasing limits of unified payments interface (UPI) for specific categories will fuel growth.

Also Read: Quick view | Why did the MPC opt for a status quo today

“Reversal of marginal standing facility (MSF) and standing deposit facility (SDF) on holidays shows regulator’s intent to manage and keep liquidity efficient for the bank,” said Mondal.

Abheek Barua, Chief Economist and Executive Vice President, HDFC Bank, said: "the RBI seemed less hawkish on liquidity management compared to the previous policy which could be seen as a signal of a move towards neutrality. This implies that while the RBI is likely to act against a significant surplus, it might also not favour a large deficit going forward."

MPC decision

RBI on December 8 left its key interest rate unchanged for the fifth consecutive meeting, citing a potential resurgence in inflation and signalling that price stability remained its primary objective.

The Reserve Bank of India's monetary policy committee (MPC), as expected, kept the repo rate, at which banks borrow short-term funds from the central bank, at 6.5 percent, as prices remain higher than the central bank’s medium-term target of 4 percent.

The MPC has kept the repo rate unchanged at 6.5 percent in the past four monetary policy reviews, after raising the rate by 250 basis points since May 2022.