(Reuters) - The Reserve Bank of India kept its repo rate at 6.25 percent for a third consecutive policy meeting on Thursday as it continues to guard against any potential flare-up in inflation and an uncertain global economic environment.
All 60 economists polled by Reuters had predicted the RBI’s six-member monetary policy committee (MPC) would keep the repo rate at the same level since October.
“RBI left rates unchanged as the markets had expected.”
“As the RBI is on hold for the moment, we expect short term bonds to outperform long bonds. Short bonds are less sensitive to the policy outlook as well as to global risks.”
“Reverse Repo increased to 6 percent is incrementally positive for banks.”
“Importantly, RBI has announced that banks can start to invest in REITs, which is a positive measure for both banks and real estate developers. For banks it offers an additional important asset class for investing and brings liquidity. For commercial real estate companies, it brings in liquidity, and frees up capital which lowers their cost of capital.”
“This is along expected lines. Repo rate has not been changed because there is an upward risk to inflation that is being anticipated, while growth appears to be turning positive in RBI’s view.”
“They are basically focused in inflation.”
“The main thing is that neutral stance is being maintained.”
“Adjustment of the LAF corridor should help arrest the decline in bond yields and excess liquidity problem to a certain degree.”
“The absence of big bang liquidity measures means the RBI still wants to wait and gauge the extent of durable liquidity - that finally remains in the system. Going by the roadmap on liquidity management given by the RBI, I believe that more durable steps for liquidity management could be in the offing later on and may be before the next policy meeting.”
“It is clear that we are at the end of the rate-cutting cycle. The RBI expects an increasing inflation trajectory and they seem to be adequately preparing for an improving capex cycle and well as liquidity lowering measures in the US.”
Reporting by Mumbai and Bengaluru newsrooms; Editing by Euan Rocha