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The Reserve Bank of India (RBI) kept its key interest rate unchanged on Friday in a widely expected move as robust economic growth continues to provide space to focus on bringing down inflation towards its medium-term target of 4%.

The Monetary Policy Committee (MPC), which consists of three RBI and three external members, kept the repo rate unchanged at 6.50% for an eighth straight policy meeting.

COMMENTARY:

RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE

"The mix of strong growth and above-target inflation does not make a case for a shift to a less-restrictive policy setting as yet, validating our view that rate easing is not on the cards this year. Political developments are not expected to sway the monetary policy direction or outlook."

SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM

"The RBI did not let up any dovish signals with regards to future policy action and perhaps some signal could come in the August policy once there is some clarity on the new budget, monsoon performance and global interest rate cycle. We continue to see the possibility of one rate cut in the fourth quarter of 2024."

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU

"While we agree with the RBI on the inflation front, we are not too convinced about improving growth prospect especially in the light of the result of the recent election wherein on the ground economic reality appeared to be different from what the real GDP data suggested and translated into the ruling government falling way short of the number of seats they expected prior to the results."

"We retain our expectation of a policy rate cut only during the fourth quarter with possibility of it being delayed to next year if inflation fails to follow RBI's desired trajectory."

MADHAVI ARORA, LEAD ECONOMIST, EMKAY GLOBAL, MUMBAI

"The policy tone was confident on domestic dynamics, with upgrade in FY25 growth and but no change in inflation trends despite near-term food-led risks."

"While the RBI took recognition of fluidity of global narratives, the governor insisted that their policy reaction function is driven primarily by domestic dynamics."

"However, we note that swift policy turns/pivots in the last two years have been purely influenced by global factors. This suggests that when needed, the aim of financial stability may even precede inflation management."

UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI

"The split in voting patterns clearly shows the increasing probability towards a pivot in the policies ahead."

"However, we believe the robust growth will give enough opportunity for the monetary policy committee to remain on a wait-and-watch mode until better clarity comes from monsoons and quality of expenditure from the Budget."

"We see room for stance change in the August policy with a plausible easing from October meeting."