By Kosaku Narioka


India's central bank maintained its policy rate steady, as widely expected, amid a backdrop of easing domestic inflation and economic resilience.

"Growth is accelerating and outpacing most forecasts, while inflation is on a downward trajectory," Reserve Bank of India Gov. Shaktikanta Das said Thursday as the monetary-policy committee held the policy repo rate at 6.50%.

Five of the committee's six members voted for the decision, with one voting for a 25-basis-point cut.

All nine economists The Wall Street Journal surveyed had expected the central bank to stand pat.

Although inflation has been on a downward trend, it has yet to reach the RBI's target of "4% on a durable basis."

India's consumer-price index in December rose 5.7% from a year earlier, compared with the RBI's target range of 2% to 6%.

"We think it will drop back over the coming months, but it will be a slow grind back to the 4% target," said Shilan Shah, deputy chief emerging markets economist at Capital Economics.

Das said the central bank expects annual inflation of 4.5% for the year starting April, following projected inflation of 5.4% for this fiscal year.

The RBI will carefully monitor food price pressures, "which can fritter away the gains" from easing core inflation, the central bank governor said. "Monetary policy must continue to be actively disinflationary to align inflation" with the 4% target.

Thursday's meeting reaffirmed expectations that the RBI might only start cutting rates in the latter half of 2024, "much later than almost all other major EMs [emerging markets]," Capital Economics said.

"The economy is performing well, which limits any immediate need for looser policy," Shah said in a note.

DBS senior economist Radhika Rao thinks market pricing for rate easing might get pushed out further.

"Keeping inflationary expectations anchored and taking inflation towards the 4% target on a sustainable basis are in focus, suggesting a dovish pivot is not imminent," she told Dow Jones Newswires.

The transmission of previous rate hikes is also still under way, Das said in Thursday's statement.

The central bank raised the policy rate by 2.5 percentage points from May 2022 to February last year in response to a surge in inflation fueled by the Russia-Ukraine war and the recovery from the Covid-19 pandemic. It has since left the rate unchanged.

Looking ahead, Das said he expects India's economic momentum to continue. The economy is expected to grow 7% in real terms next fiscal year.

Still, he stressed the need to stay vigilant.

"Policymaking during uncertain times has to be based on a continuous assessment of the incoming data and its implications for the evolving outlook," the RBI governor said.


Write to Kosaku Narioka at kosaku.narioka@wsj.com


(END) Dow Jones Newswires

02-08-24 0314ET