Inflation print, US Fed stance: Key factors behind RBI's hawkish pause on interest rates
Bank of India (RBI) at its October bi-monthly monetary policy committee (MPC) meeting, kept the benchmark repo rate unchanged at 6.5 per cent for the fourth straight meeting in the current fiscal 2023-24. The rate-setting panel also decided to remain focused on withdrawal of accommodation - with five out of six members voting in favor, to ensure that India's headline inflation progressively aligns to the target, while supporting growth.
According to a report by DSP Mutual Fund Converse titled, ‘Converse Report (October 2023)’, the checklist for a pause on interest rate hikes by the central bank are as follows: 1. When the US Fed starts pausing • Reduces risk of capital outflows 2.
When inflation is within comfort • Reduces risk of inflationary policy • Barring 2014, when RBI did not have 6 per cent CPI target. But CPI was falling in 2014 3.
When balance of payments (BoP) (and currency) is stable • Reduces inflationary / external risks The next RBI monetary policy meeting is scheduled during December 6-8, 2023. MORE TO COMEMilestone Alert!
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