MUMBAI: In a surprising move, India’s central bank held interest rates on Thursday for the first time in nearly a year citing “unprecedented uncertainty” in global markets but said it was committed to tackling persistent inflation.
The Reserve Bank of India (RBI) kept the benchmark repurchase rate at 6.50 percent after hikes at all six of its prior meetings since May 2022.
The move defied market expectations of a 25 basis points increase and recent hikes by the Federal Reserve, the European Central Bank and the Bank of England.
“What we are witnessing today is unprecedented uncertainty in geopolitics, economic activity, price pressures, and financial markets never seen before,” RBI governor Shaktikanta Das said in a webcast.
“The decision to pause on the repo rate is for this meeting only” and the RBI’s Monetary Policy Committee remained “focused on withdrawal of accommodation”, he added.
The bank began raising rates after prices soared in the wake of the Ukraine war.
Inflation remained at 6.44 percent in February, above the RBI’s upper band of six percent, but down from a peak of 7.79 percent in April 2022.
“Our job is not yet finished, and the war against inflation has to continue,” Das said. “And this has to continue until we see a durable decline in inflation closer to the target.”
This week, the World Bank slashed its India growth forecast to 6.3 percent from 6.6 percent for the financial year to March 2024, citing “slower consumption growth and challenging external conditions”.
