Key facts
- India's monetary policy committee is considering future rate hikes.
- The panel kept the policy repo rate unchanged at 5.25% on August 5.
- Headline inflation was 4.45% in July, within the RBI's 2-6% tolerance band.
- The RBI trimmed its inflation forecast for the current financial year to 5% from 5.1%.
- The RBI increased its economic growth forecast to 6.7%.
MUMBAI, Aug 19 (Reuters) - India's monetary policy committee has signaled a potential for future interest rate increases, as it closely monitors inflation for signs of broader economic impact. The committee voted unanimously to maintain the policy repo rate at 5.25% during its August 5 meeting, keeping the monetary policy stance at 'neutral'.
Headline inflation in India stood at 4.45% in July, remaining within the Reserve Bank of India's (RBI) 2-6% tolerance band and above its 4% medium-term target. RBI Chief Sanjay Malhotra noted in the meeting minutes that while inflation is currently benign, there are persistent risks from higher food, fuel, and input prices potentially translating into a more generalized increase. He stated that any evidence of these risks materializing could necessitate policy tightening.
Central bank deputy governor Poonam Gupta indicated that while there is no scope for further policy easing, uncertainty from global developments and weather risks warrants a 'wait and watch' approach. India has maintained its policy rates this year, distinguishing itself from some regional peers that have tightened monetary policy in response to inflationary pressures from higher energy prices and currency volatility.
For the current financial year, the RBI revised its average inflation forecast downward to 5% from 5.1%, while simultaneously increasing its economic growth forecast to 6.7%.