MUMBAI, Aug 08 (Reuters): The Reserve Bank of India (RBI) kept its key interest rate unchanged on Thursday, as widely expected, retaining its focus on bringing inflation down even as global market volatility left other major central banks poised to ease policy.
The Monetary Policy Committee (MPC), which consists of three RBI and three external members, kept the repo rate (unchanged at 6.50 per cent for a ninth straight policy meeting.
Four out of six MPC members voted in favour of the rate decision.
The MPC last changed rates in February 2023, when the policy rate was raised to 6.50 per cent.
The monetary policy stance was retained at 'withdrawal of accommodation' to aid the MPC's focus on bringing inflation towards the target, with four of the six members voting in its favour.
All 59 economists in the Reuters poll conducted in late July predicted the central bank would stand pat on rates. It is important for monetary policy to stay the course in bringing inflation down towards its 4 per cent medium term target, RBI Governor Shaktikanta Das said, adding that India's food inflation remains "stubbornly" high.
"Growth remains resilient, inflation has been trending downward and we have made progress in achieving price stability, but we have more distance to cover," Das said. Ensuring price stability is important for sustainable growth, Das said.
"With growth remaining robust, the MPC still has room to hold on to policy stance to get confirmation on the disinflationary trend," said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank.
"We continue to expect scope for change in stance in the October policy with rate cuts beginning from December."
After the RBI maintained its hawkish policy stance, Indian shares, fell but recovered later to trade flat.
The 10-year benchmark bond yield rose slightly to 6.872 per cent from 6.8678 per cent before the policy decision, while the Indian rupee was nearly flat at 83.93 against the dollar.
Investors were hopeful the RBI will soften its overall stance on inflation following the recent souring of global market sentiment and firmer expectations the Federal Reserve will cut interest rates in September.
Global equities and currencies tanked early this week as the Bank of Japan hiked rates to their highest levels since 2008 last week and fears of a US recession rose on the back of weak employment numbers.
Meanwhile, India's foreign exchange reserves hit a record high of $675 billion as of Aug. 2, Shaktikanta Das, the governor of the central bank, said on Thursday.
The reserves rose by $7.6 billion in the reporting week, as per Reuters' calculations. They had fallen by $3.5 billion in the prior week, the biggest in over three months.
The Reserve Bank of India (RBI) intervenes in the foreign exchange market to curb excess volatility in the rupee.
Changes in foreign currency assets are caused by the RBI's intervention as well as the appreciation or depreciation of foreign assets held in the reserves. Foreign exchange reserves also include India's reserve tranche position in the International Monetary Fund.
The currency was trading at 83.95 on Thursday, after hitting a record low of 83.9725 in the previous session.
