As widely anticipated, the RBI held the policy rate at 6.5% and kept the stance unchanged at “withdrawal of accommodation” amidst incomplete transmission of policy rate hikes in the past. We assess the tone to be hawkish given the strong reiteration of aligning inflation to the target of 4% and tighter liquidity stance. The statement highlighted that the RBI may undertake OMO sales to keep liquidity consistent with the current policy stance. For the outlook, while the central bank retained its inflation projection at 5.4% for FY24, it flagged concerns regarding the generalization of food price pressures and elevated global food and energy prices. We expect the central bank to remain on a prolonged pause in FY24.
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