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The RBI held rates and its neutral stance as expected, signalling confidence in domestic growth while flagging rising external headwinds.The Reserve Bank of India held policy steady as expected, with the MPC unanimously keeping the repo rate at 5.25%.SDF (standing facility rate) rate, which is the floor of the monetary policy corridor, unchanged at 5.00%The RBI retained a neutral policy stance, signalling comfort with current settings after aggressive easing.Officials said underlying inflation remains low, while near-term growth and inflation outlooks stay positive.External headwinds have intensified since the last meeting, but domestic fundamentals are seen as resilient.The Indian rupee was little changed after the decision, reflecting a well-telegraphed outcome.The Reserve Bank of India kept monetary policy unchanged on Friday, striking a steady tone on growth and inflation while acknowledging rising external risks.The RBI’s monetary policy committee voted unanimously to hold the repo rate at 5.25%, with the central bank also leaving the marginal standing facility rate at 5.50% and the standing deposit facility rate at 5.0%. The MPC retained its neutral policy stance, signalling that current settings remain appropriate after a prolonged easing cycle.In his remarks, the RBI governor said the Indian economy remains on a steadily improving trajectory, with domestic growth momentum intact despite a more challenging global backdrop. Underlying inflation was described as continuing to run low, giving policymakers room to stay on hold even as uncertainty abroad has picked up.The central bank acknowledged that external headwinds have intensified since the last policy meeting, reflecting global financial conditions and lingering geopolitical and trade-related risks. Even so, officials said the near-term outlook for domestic inflation and growth remains positive, underpinned by solid demand and favourable inflation dynamics.Markets took the decision in stride. The Indian rupee traded near unchanged against the US dollar following the announcement, reflecting broad consensus around the rate hold and limited surprises in the policy message. Bond markets also showed little reaction, with investors focused more on the RBI’s forward guidance than the headline decision.With inflation expected to stay around or below the RBI’s 4% target and growth holding up, the policy signal suggests an extended pause ahead. Attention now shifts to how persistent external pressures become, and whether global financial conditions eventually force a reassessment of the RBI’s neutral stance later in the year.
This article was written by Eamonn Sheridan at investinglive.com.
đź’ˇ DMK Insight
The RBI’s decision to hold the repo rate at 5.25% signals stability, but external pressures could shake things up. By maintaining its neutral stance, the RBI is projecting confidence in India’s domestic growth, which is crucial for traders focused on the INR and related assets. However, the mention of rising external headwinds suggests that geopolitical tensions or global economic shifts could impact this outlook. Traders should keep an eye on how these external factors might influence the INR’s performance against major currencies. If external pressures escalate, we could see volatility in forex pairs involving the INR, particularly against the USD. It’s also worth noting that while the RBI’s current stance may seem reassuring, the market could react sharply if inflation or global economic conditions change. Watch for any shifts in the MPC’s language in upcoming statements, as that could signal a pivot in monetary policy. For now, traders should monitor the INR closely, especially around key economic releases or geopolitical events that could sway market sentiment.
đź“® Takeaway
Keep an eye on the INR’s performance against the USD; external pressures could lead to volatility, especially if inflation concerns rise.
