The Reserve Bank of India (RBI) has kept its key policy rate and monetary policy stance unchanged, a move that was widely anticipated by market participants. While maintaining status quo, the central bank underscored heightened risks on the inflation front, signalling that price pressures remain a key concern for policymakers.
Reacting to the monetary policy decision, Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, said the RBI’s decision was on expected lines but reflected growing caution over inflation. She said the central bank had highlighted amplified inflation risks and added that Kotak Mahindra Bank expects a cumulative 50 basis points (bp) rate hike beginning in October if inflationary pressures persist.
Bhardwaj also noted that one of the positive outcomes of the policy was the RBI’s announcement of measures aimed at attracting capital inflows. According to her, these steps are expected to help ease pressure on the Indian rupee (INR), which has remained under strain amid global economic uncertainties and volatile capital flows.
Financial market participants and businesses in Kolkata are likely to closely monitor the RBI’s inflation outlook and the possibility of rate hikes from October. While stable interest rates offer temporary relief for borrowers and businesses, any future tightening could increase borrowing costs. At the same time, measures to support capital inflows and stabilise the rupee are expected to boost investor confidence and provide a more stable environment for trade and industry in eastern India.
