RBI Governor Sanjay Malhotra announced on Wednesday that there will be no rate cuts in the near term, shifting the policy stance to 'Calibrated Tightening'.
Following the three-day Monetary Policy Committee meeting, he stated that future policy actions could involve either a pause or an increase in the repo rate, depending on evolving economic conditions.
Malhotra emphasized that the length and intensity of the rate hike cycle will depend on growth, inflation trends, particularly underlying inflation, the broadening of price pressures, and the impact of supply shocks.
The central bank anticipates headline Consumer Price Index inflation to average nearly 5.8 percent over the next three quarters.
He added that core inflation is projected at 4.94 percent for the current financial year.
The Standing Deposit Facility rate is set at 5.25 percent, while both the Marginal Standing Facility rate and the bank rate remain at 5.75 percent.
The Indian economy is expected to demonstrate resilience during this period.
According to Malhotra, private consumption has remained broadly resilient, supported by discretionary spending, and fixed investment continues to be strong as indicated by various metrics.
However, some weakness has been noted in areas such as non-durable goods and domestic air passenger traffic.
service sector activity has remained steady and broad-based, benefiting from robust domestic and external demand, with manufacturing and services PMIs staying in the expansionary zone during the second quarter.
After comprehensive evaluation of macroeconomic and financial conditions, the MPC unanimously voted to raise the policy repo rate by 25 basis points to 5.50 percent.
