India

India Monetary Policy October 2023

India: RBI stands pat for fourth meeting in a row in October

On 6 October, the Reserve Bank of India (RBI) left the repo rate unchanged at 6.50%, as expected by the market. It also left its standing deposit facility and marginal standing facility rates unchanged at 6.25% and 6.75%, respectively. All board members voted for the decision. That said, the RBI effectively pushed in the direction of tightening by saying that it would consider selling Indian bonds to mop up excess liquidity.

As it did in the prior month, the RBI stressed the upside risks to inflation posed by rising prices for agricultural and energy commodities, justifying its decision to keep rates steady by stating that past tightening was still “working its way through the economy”; inflation remains above the RBI’s 4.0% target.

Meanwhile, the RBI also opted to keep its policy stance focused on the “withdrawal of accommodation”, maintaining a hawkish tone.

The majority of our panelists expect the RBI to keep holding the line through to the end of FY 2023 in March.

The RBI’s next meeting is due for 6–8 December.

Analysts at the EIU said: “We retain our forecast that the RBI will keep the policy rate at its current level until mid-2024, with risks leaning mainly towards rates having to be raised further or held at the current level for longer.”

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