RBI meeting: RBI maintains status quo on repo rate but changes stance to ‚Neutral‘; what does it mean for the markets? Experts decode
The Reserve Bank of India’s (RBI) today, October 9, in its policy decision kept the repo rate unchanged at 6.5 per cent but changed its stance to ‚Neutral‘ from ‚Accommodative‘ which is largely assumed as a signal for rate cuts soon. As per thr RBI Governor Shaktikanta Das, the growth-inflation matrix is well balanced and conditions are favourable for attaining the goal of durable low inflation in the near future.
Furthermore, the RBI Monetary Policy Committee (MPC) maintained a status quo on its inflation target for FY25 is at 7.2 per cent and 4.5 per cent respectively. Das highlighted adverse weather conditions, ongoing geopolitical conflicts, and a rise in select commodities as the key threats to its inflation forecast.
Meanwhile, the MPC has cut its Consumer Price Index (CPI) inflation forecast for the first quarter of fiscal year 2025-26 (Q1FY26) to 4.3 per cent from 4.4 earlier.
Market participants are largely anticipating a rate cut soon after RBI’s change in stance. Experts expect banking stocks to benefit from the rate cut going ahead and bond yields to ease.
This ’neutral‘ stance is not a precursor to rate cuts but a strategic recalibration which is ‚a calculated wait-and-see approach‘, allowing the central bank to act swiftly if inflationary or growth dynamics shift sharply.
