The Reserve Bank of India (RBI) has kept the repo rate unchanged at 6.5% during its latest Monetary Policy Committee (MPC) meeting, while shifting its policy stance to “neutral.” The decision, announced by RBI Governor Shaktikanta Das on Wednesday, was widely anticipated by economists and market participants, given early signs of a slowdown in the country’s economic growth.
The three-day meeting of the six-member MPC, which concluded today, was the first with three newly appointed external members on the panel. The unchanged repo rate signals the RBI’s cautious approach toward balancing inflation concerns with the need to support economic growth. Governor Das emphasized that while inflation remains elevated, recent data suggests it is moderating, giving the central bank room to adopt a more flexible stance going forward.
The shift to a “neutral” stance indicates that the central bank is now open to either tightening or easing rates depending on future economic developments. This marks a shift from its previous “calibrated tightening” stance, where the focus was primarily on controlling inflation. Das highlighted that while inflationary pressures have eased slightly, there are still global uncertainties and domestic challenges that the central bank will monitor closely.
With the economy showing early signs of a slowdown, including softening industrial production and a dip in export growth, there is growing speculation that the RBI could consider cutting rates in future meetings if the trend continues. The new “neutral” stance provides the flexibility for such a move, should conditions warrant.
Overall, the decision to keep the repo rate steady, combined with the policy shift, underscores the RBI’s cautious but adaptable approach in managing both inflation and economic growth, with a potential rate cut in sight if growth conditions worsen further.