All boxes ticked

RBI is rightly focused on the inflation target

The Indian central bank’s monetary policy committee (MPC), as widely expected by financial market participants, left the policy repo rate unchanged at 6.5 per cent on Thursday. Consequently, the standing deposit facility and the marginal standing facility rate also remained unchanged. The MPC has increased the policy rate by 2.5 percentage points in the current cycle, which is still working through the system. The rate-setting committee did well to also leave the policy stance unchanged and will remain focused on the withdrawal of accommodation. There were expectations in certain sections of the market that the MPC would change its stance to neutral. However, such a change could have led to expectations that the MPC would reduce the policy rate in the coming months and go against the policy objective of the central bank.