Head of Research at UOB Group Suan Teck Kin, CFA, assesses the latest interest rate decision by the RBI.

“The Reserve Bank of India (RBI) at its latest Monetary Policy Committee (MPC) meeting unexpectedly decided to pause its year-long rate hike campaign, keeping its benchmark repo rate at 6.50% while the market and we had expected potentially a final 25 bps hike.”

“The latest decision came amidst a backdrop of slower growth and persistent inflation pressures, with banking stresses in the US and Europe adding to the mix of uncertainty and volatility. While noting the need to assess the progress of its tightening so far, the RBI remarked that the pause is only for this meeting, and it is still focused on withdrawal of its accommodative policy.”

“Outlook – While the possibility of further rate increases remains on the table, we see a high likelihood of the RBI maintaining its rate pause, for now, at 6.50%. Incoming data, particularly consumer prices, as well as developments in the external environment will be the main factors of consideration for the upcoming decisions. The next MPC meeting is scheduled for 6-8 Jun 2023.”