Mumbai (Maharashtra) [India], August 8 : Economists and Industry bodies have welcomed RBI's move to keep the policy repo rate unchanged they said that maintaining the repo rate provides stability and predictability in the financial markets.
The RBI on Thursday kept the repo rate unchanged at 6.5 per cent. This marks the ninth consecutive time the central bank has opted for stability in its monetary policy. Economists say that the move demonstrates the RBI's intention to keep inflation within its limits.
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said, "We continue to expect scope for change in stance in the October policy with rate cuts beginning from December. The prospects of simultaneous change in stance and rate cuts could increase depending on how domestic inflation and global environment transition,"
Dharmakirti Joshi, Chief Economist CRISIL, supported RBI's stance and said that the monetary policy expectations from the most influential central bank, the US Federal Reserve, are becoming less restrictive for emerging markets. European Central Bank (ECB) and Bank of England (BOE) have already initiated rate cuts. But on the domestic front, Joshi justified RBI's concern for inflation.
"On the domestic front, with a lower fiscal impulse and investment-focused spending, the budget was clearly non-inflationary. But that is not enough for the Reserve Bank of India (RBI) to initiate rate cuts yet. Other domestic factors, particularly inflation, still dictate a cautious wait-and-watch approach,'" he said.
Niranjan Hiranandani, Chairman, of NAREDCO and Hiranandani Group, says "The RBI's decision to maintain the repo rate unchanged is a stabilizing force in the current volatile global economic scenario. With the U.S. recession threats hovering, the Bangladesh crisis impacting regional capital flows, and broader global economic uncertainties, steady home loan interest rates offer a semblance of predictability. However, stakeholders must closely monitor these geopolitical undercurrents and macroeconomic indicators to adapt their strategies effectively."
Pointing out the global situations and decisions of the major central banks, Narinder Wadhwa, Managing Director and CEO of SKI Capital said,"With global economic conditions being uncertain, maintaining the repo rate provides stability and predictability in the financial markets."
Food inflation is still a concern, but improved monsoon, larger kharif sowing, and easing of food inflation globally in July may influence RBI to cut the rate in its October policy.
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