RBI Holds Repo Rate Steady at 5.5%, Indian Markets React Mixed
By ScanX News Team
The RBI's Monetary Policy Committee unanimously decided to keep the repo rate unchanged at 5.5%. The GDP growth forecast remains at 6.5% for the full year, while the Consumer Price Inflation forecast has been lowered to 3.1% from 3.7%. The decision led to mixed reactions in the Indian stock markets, with rate-sensitive sectors experiencing declines. The Nifty Bank index retreated 0.50% from its day's high. Experts anticipate a potential 25 basis points rate cut in the October meeting, with the terminal policy rate estimate revised to 4.75%.
*this image is generated using AI for illustrative purposes only.
The Reserve Bank of India's (RBI) Monetary Policy Committee has unanimously decided to maintain the repo rate at 5.5%, leading to mixed reactions in the Indian stock markets. This decision comes as the central bank assesses the current economic landscape and inflation outlook.
Key Highlights
- RBI keeps repo rate unchanged at 5.5%
- Monetary policy stance remains neutral
- GDP growth forecast maintained at 6.5% for the full year
- Consumer Price Inflation forecast lowered to 3.1% from 3.7%
Market Reaction
The decision had a varied impact on different sectors of the Indian stock market:
- Benchmark indices Nifty and Sensex traded mixed following the announcement.
- Rate-sensitive sectors experienced declines:
- Auto and consumer stocks fell by up to 1.00% each
- Realty stocks dropped 2.33%
- The Nifty Bank index retreated 0.50% from its day's high
RBI's Economic Outlook
Governor Sanjay Malhotra expressed confidence in the Indian economy's position amidst the changing global landscape. The central bank's decision to maintain the GDP growth forecast at 6.5% for the full year reflects this optimism.
Notably, the RBI has revised its Consumer Price Inflation forecast downwards to 3.1% from the previous 3.7% for the financial year. This significant reduction in the inflation outlook suggests that the central bank perceives reduced inflationary pressures in the economy.
Expert Analysis
The Piramal Group's Chief Economist has provided insights on potential future moves by the RBI:
- A 25 basis points rate cut is expected in the October meeting
- The terminal policy rate estimate has been revised to 4.75% from 5.00%
This revision is attributed to the sharp downward adjustment in the inflation forecast, indicating a potentially more accommodative stance in the coming months.
Conclusion
The RBI's decision to hold rates steady while lowering inflation forecasts presents a balanced approach to monetary policy. As the Indian economy navigates through global economic shifts, market participants will be closely watching for any signals of future policy changes, particularly in light of the revised inflation outlook.
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