India cenbank holds rates as expected, shifts stance to 'neutral'

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(Reuters) -The Reserve Bank of India (RBI) kept its key interest rate unchanged on Wednesday, as widely expected, but tweaked its policy stance to "neutral", opening the door for rate cuts amid early signs of a growth slowdown in the economy.

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

The committee, however, changed its policy stance to "neutral" from "withdrawal of accommodation".

COMMENTARY

ANITHA RANGAN, ECONOMIST, EQUIRUS, MUMBAI

"The signal that the RBI is warming up or getting more comfortable towards accommodation is the point around transmission to credit markets being satisfactory."

"However, at the juncture of elevated global volatility, perhaps RBI does not believe it to be opportune to cut rates."

"They will await more certainty from external side (U.S. elections, Middle East tensions), before taking their first step which is not likely before March of 2025."

SONAM SRIVASTAVA, FOUNDER, WRIGHT RESEARCH, MUMBAI

"The RBI's decision reflects a measured approach to balancing inflationary risks and growth prospects."

"While inflation has eased, the central bank's caution stems from looming threats such as rising crude prices, uneven rainfall, and ongoing geopolitical tensions."

ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURUGRAM

"Today's MPC review prudently prioritized flexibility by changing the stance to neutral, in line with our expectations."

"This has opened the door for a potential rate cut in December, if the lurking risks to inflation, both domestic and global, do not materialize."

"In our view, the Indian rate-cut cycle will be fairly shallow, restricted to 50 bps over two policy reviews."

TERESA JOHN, LEAD ECONOMIST, NIRMAL BANG, MUMBAI

"A rate cut in December seems increasingly likely should the second-quarter growth undershoot the RBI's estimate. Nevertheless, we expect the rate cut cycle in India to be shallow."

SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM

"If domestic conditions evolve favourably over the coming months, a December rate cut is not off the table."

"The RBI showed comfort on both the durable disinflation underway and transmission to the credit market, which aligns with their acceptance of easier liquidity conditions over the last few months."

GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA SECURITIES, MUMBAI