RBI holds key rates steady; focuses on 4% inflation target

RBI key rates: The Reserve Bank of India (RBI) has kept its key interest rate steady at 6.50 per cent , aligning with market expectations. This decision marks the ninth consecutive meeting where the RBI has opted to maintain the rate, as part of its ongoing effort to steer inflation towards its 4 per cent target.

The Monetary Policy Committee (MPC), consisting of three RBI members and three external experts, reached this decision with four out of six members supporting it. The MPC's stance remains at 'withdrawal of accommodation' to support its inflation-targeting goals, with the same majority backing this position.

A Reuters poll of 59 economists conducted in late July had predicted the RBI would hold rates steady. The last change in the policy rate occurred in February 2023 when it was raised to 6.50 per cent. Despite a recent increase in the annual retail inflation rate to above 5 per cent  due to rising food prices, the RBI continues to prioritize inflation control.

Investor sentiment has been influenced by global market developments, including a recent rate hike by the Bank of Japan and concerns about a potential US recession. Although Indian equities have performed relatively well, the rupee has hit all-time lows, prompting intervention from the central bank.

Strong GDP growth, with a projected 7.2 per cent  expansion for the fiscal year, supports the RBI's focus on inflation management, even amidst global economic uncertainties.

(With Reuters inputs)