RBI MPC Decision: Stance Expected, Central Bank In 'Wait And Watch' Mode, Say Experts
The rate-setting panel of RBI, which concluded its three-day meeting on Wednesday, retained the repo rate at 5.5% in a unanimous decision.
The Reserve Bank of India is in a 'wait and watch' mode, as it is looking at how the previous monetary policies will transmit into the system, said Sakshi Gupta, principal economist at HDFC Bank.
Gupta's reaction comes as the RBI's Monetary Policy Committee on Wednesday kept the benchmark repo rate unchanged. The country's central bank also maintained its 'neutral' stance.
The rate-setting panel of RBI, which concluded its three-day meeting on Wednesday, retained the repo rate at 5.5% in a unanimous decision. This comes after a 50-basis point reduction in its June policy review meeting.
"The policy rate decision today was widely expected. We need to also see this as RBI has already delivered 100 bps rate cut so far in the calendar year 2025," Gupta told NDTV Profit.
On the rate cut so far in 2025, Gupta noted, "The data is very mixed right now, we are seeing positive results from the rural side."
"RBI has signaled that they are keeping a watch on the growth front and inflation trajectory-where currently the inflation is coming down. But, FY26 the inflation will also start picking up, as there will be an unfavourable base effect. If you look at where RBI is projecting Q1FY27 inflation numbers, that is close to 4.9%," she said.
The uncertainties of tariffs are still 'evolving' and the monetary policy transmission is 'continuing,' RBI Governor Sanjay Malhotra said today.
Echoing RBI's stance on tariff, Gupta said, "The tariff talks are still in evolving situations, and therefore the impact of the growth is still very uncertain."
India is transitioning towards 2-4% inflation from 4-6% inflation range, said Maneesh Dangi, founder, Macro Mosaic Investing and Research. "That would mean that the rates would have to settle a lot lower than what we have seen in last 5-10 years," he said.
"We had a lot of rate and liquidity easing in last few months," he told NDTV Profit.
Dangi highlighted that India's leverage cycle is clearly towing. "The corporate leverage cycle could get cramped up in last 2-3 years. Household leverage cycle has seen a slowdown," he added.
"I think Indian conditions would drive rates a lot lower. Both exteriors and interiors of economy are supporting a case of a pause at the stage."
In terms of the repricing which is going on at the moment, 70-80% of re-pricing from the previous rate cut has already happened, said Ashwin Tewari, Managing Director at State Bank of India.
"The RBI has played with little bit cautious which is warranted, especially because the tariff situation isn't clear at all. Despite the tariff situation not being clear, the GDP forecast has been maintained which tells us that there are alot of other factors supporting the growth," he said.
'Very much on expected lines,' commented Jaideep Iyer, head of strategy at RBL Bank. "There is time before the transmission from the previous rate cut happens, hence keeping the rates unchanged was a good call," he added.
Incrementally massive fiscal consolidation from here on looks limited in bond market, according Devang Shah, head - fixed income at Axis Mutual Fund. "In that case, where supply on government bonds and state development loans continues to remain higher, we do not see too much rally in bond markets. Liquidity in the system continues to remain positive for atleast for the next 12 months," he added.
"Our view is that corporate bonds can trade lower and the short end of the curve which is 2-5 year segment. We are not bearish on policy. The long bonds will remain where they are and the short bonds segment will continue to be favorable segment for investors," he noted.
