RBI Holds Rates at 5.25%, Balances Inflation Fight with Growth Support

Trade association ASSOCHAM appreciated the "calibrated step aimed at strengthening stability in the macroeconomic environment", adding that it helps sustain growth momentum and ensure price stability.

"This decision underscores the central bank's careful assessment of prevailing macroeconomic conditions and its commitment to remain flexible in responding to evolving economic developments," said Saurabh Sanyal, Secretary General ASSOCHAM.

Experts broadly opined that the pause was expected given risks from El Nino, crude prices and global uncertainty.

Madan Sabnavis, Chief Economist, Bank of Baroda, indicated dimmed likelihood of any further rate cuts as the RBI has flagged El Nino as a risk to inflation, too, and projected a GDP growth at 6.9 per cent and inflation at 4.6 per cent.

"The view on economic prospects is balanced and indicates resilience to a large extent. The RBI has reiterated that its exchange rate policy remains unchanged, which should reassure markets," Sabnavis said.

Despite sufficient buffer stocks, the RBI has raised concerns on EL Nino as one of the key inflation risks, Vinay Pai, MD & Head of Fixed Income, Equirus Group noted, calling the central bank's commentary as a wait and watch approach in the backdrop of the ongoing geopolitical uncertainty.

Garima Kapoor Deputy Head of Research and Economist at Elara Capital cautioned that RBI's growth estimates for FY27 may need revision.

It may need a reassessment as full pre-war energy export volumes might take 3-6 months due to backlog, diverted tankers, and partial infrastructure damage, she noted.

"We do not see MPC hiking policy rates until CPI inflation durably surpasses 6 per cent and inflation expectations get unhinged," Garima shared her forecast.

- IANS