RBI's Neutral Stance: Experts on Rate Cut

Kolkata, Oct 9 (PTI) The Reserve Bank of India's decision to change its stance to 'neutral' from 'withdrawal of accommodation' is significant and appropriate, experts said on Wednesday.

The RBI kept its key interest rate unchanged on Wednesday but took the first step towards a rate cut as it eased its relatively hawkish policy stance to 'neutral'.

The monetary policy committee, which included three RBI officials and an equal number of new external members, voted five-to-one to keep the benchmark repurchase or repo rate - which governs the interest rate of home, auto, corporate and other loans - at 6.5 per cent for a 10th straight policy meeting.

"The status quo on the repo rate was no surprise. The change in stance to 'neutral' after a more hawkish stance of 'withdrawal of accommodation' is significant and appropriate," Bandhan Bank Chief Economist Siddhartha Sanyal said.

The MPC has "rightly decided to wait for critical information" regarding geo-political developments, commodity price trends and domestic growth-inflation dynamics in the coming months, he said.

MPC's future action will be data-dependent, Sanyal said.

HDFC Bank Chief Economist Abheek Barua said, "Today's policy announcement emphasised the centrality of domestic conditions in monetary policymaking."

The apex bank acknowledged the durable disinflationary trend underway although highlighting lingering domestic and global risks, he said.

"Given this, if conditions evolve favourably over the coming months, a rate cut in December is not off the table", Barua said.

The MPC's 'neutral' stance and the unchanged policy rate signal circumspection, and also underscore the likelihood of a rate cut in December, Crisil Chief Economist Dharmakirti Joshi said.