MUMBAI, August 5 (Reuters) – The Reserve Bank of India kept its policy repo rate unchanged at 5.25% on Wednesday, as it awaits data to judge if higher oil prices are stoking inflationary pressures across Asia’s third largest economy.
An overwhelming majority of 68 out of 72 economists polled by Reuters had forecast that the RBI will stand pat on its benchmark interest rates.
The RBI’s six-member rate panel, which includes three external members, voted unanimously to keep rates on hold.
The rate-setting panel also retained the policy stance at “neutral”.
While headline inflation has risen above the central bank’s target, this is largely on account of higher fuel prices and broader price pressures remain in check, RBI Governor Sanjay Malhotra said while announcing the policy.
The Indian central bank’s decision to keep rates on hold comes even as peers including Indonesia, Philippines and others have raised borrowing costs to counter higher energy prices and currency pressures brought on by the Iran war. Instead it announced a series of steps at the previous meeting to boost capital inflows and support the rupee.
Retail inflation in India rose above the central bank’s medium term target of 4% for the time in 17 months in June but is projected to stay within its tolerance band of 2%-6% in the current fiscal year, giving policymakers breathing room on rates.
Economic growth, meanwhile, has started to show modest strain with the private sector purchasing managers index dipping to a five-year low in July.
(Reporting by Jaspreet Kalra and Abinaya V; Editing by Shri Navaratnam and Mrigank Dhaniwala)
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