Reserve Bank of India Governor Shaktikanta Das on Wednesday said it is changing its stance of monetary policy to 'neutral' from withdrawal of accomodation. However, it has kept the benchmark interest rate unchanged for 10th time in a row at 6.5 per cent.
The decision by the Monetary Policy Committee was decided 5:1 in favour of status quo on interest rate.
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Governor Das said food inflation will come down later in the year, thanks to good monsoon and adequate buffer stock. RBI projects retail inflation at 4.5 per cent in the current fianancial year in the backdrop of a normal monsoon.
Does RBI 'neutral' stance hint at rate cut in December?
With the RBI changing its stance to neutral, there is a possibility that the MPC will lower the interest in December. With food inflation also expected to come down, RBI is likely to take the plunge as major central banks, including the US Federal Reserve, lowering their interest rates.
Explaining why RBI changed its stance to neutral, Das said that prevailing and expected inflation as well as growth balance have created a congenial condition for the monetary policy change.
RBI has also kept its growth projection unchanged at 7.2 per cent for FY25, with Governor Das saying India's growth story remains intact. He said the economy presents picture of stability and strength and the country's financial sector is healthy, resilient and stable. He pointed out that the health parameters of Indian banks are strong but warned against consumer loan building up and credit card outstanding issues.
He pointed out that the manufacturing sector is gaining amid improving domestic demand, lower input cost and government policies.