No rate hike now but it’s only a pause: RBI

Press Trust of India

Mumbai: After unanimously pausing for the second time in a row, the Reserve Bank on Thursday reiterated that leaving the key rates and the stance unchanged “is not a pivot but only a pause” and that future policy actions will purely be data-dependent as a durable fall in inflation is still a long way. Earlier in the day, the RBI governor-led ratesetting panel MPC unanimously left the repo rate unchanged at 6.50 per cent and maintained that they will continue to work towards withdrawing policy accommodation.

The six-member panel also reiterated continuing measures to bring inflation under the target in a durable manner. While consumer price index -based inflation eased in March and April and moved into the tolerance band, headline inflation is still above the mandated target of 4 per cent and is expected to remain so during the rest of the current fiscal, said Governor Shaktikanta Das announcing the monetary policy.

“Therefore, close and continued vigil on the evolving inflation outlook is absolutely necessary, especially as the monsoon outlook and the impact of El Nino remain uncertain. Our goal is to achieve the inflation target of 4 per cent in a durable manner and not just keeping inflation within the comfort band of 2-6 per cent,” Das told reporters at a post-policy presser. The governor parried repeated questions from the media about what holds back the MPC and RBI from uttering the words ‘end of rate hikes’ or the beginning of a neutral or accommodative policy stance.

“It is not a pivot; I reiterate this is only a pause, which is the second one in two successive reviews. Our future policy actions will purely be dependent on evolving situations. Because even though the recent fall in headline inflation to within the target band (led mainly by the cooling core inflation), we need to ensure that it is durable, and therefore there is no room for complacency on inflation,” Das said.

Explaining that RBI is only on a pause and that there is no change to a neutral/accommodative stance, Das said, “our objective is to ensure that inflation aligns with the mandated target on a durable basis and not a one-off.