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(Reuters) - The Reserve Bank of India (RBI) kept its repo rate on hold at 6.25 percent for a second straight policy meeting, opting to wait for more clarity on inflation trends and on how a radical crackdown on "black money" is impacting economic growth.
The RBI monetary policy committee on Wednesday voted 6-0, its third unanimous decision in a row since being established in September.
"It's a big surprise to us. It looks like going ahead there are no chances of further rate reductions. The commentary is in line with the decision they have taken but it is probably not in sync with the reality. They are still saying that there is upside risk to the 5 percent inflation number, which is very shocking because across the street everyone is talking about definitely a below 4.5 percent CPI number."
"With a borderline inflation estimate of around 4.5 pct for FY18, RBI doesn't want to be accommodative any more. Moreover, the RBI seems to have passed the baton to the government, for bringing down interest rates further from the current levels."
"As indicated in the statement, the RBI believes that further transmission would be dependent on recapitalisation of the banking sector, resolution of the NPA problem and calibration of interest rates on the small saving schemes. Time to yet again shift the focus from monetary policy to financial sector measures of the government for further relief in the lending rates."
SAMRAT DASGUPTA, CEO, ESQUIRE CAPITAL INVESTMENT ADVISORS:
"The market is already pushing the rates down. The prospect of U.S. raising interest rates is also there on the horizon. So investors want to see how the rate cycle in the U.S. phases out. In India, because of excess liquidity, the rates have anyway come down."
"Because the markets have already pushed the rates down, RBI pushing it by 25 basis points could not have made much of a difference."
"The decision to keep rates unchanged came as a surprise. My forecast is for a 50 bps rate cut this year and this would have been a good chance for the RBI to cut the first 25 bps to support growth. However, they are making a point on how demonetisation has infused a lot of liquidity into the system and it seems that they expect better transmission that should lead to lending rate cuts."
"I feel RBI has implemented the wait and watch policy to get a clearer view of the inflation trajectory. However going by the budgetary stance of the government, which is non expansionary, RBI may have thought that there would be less pressure on inflation and could have advanced the rate cut to February instead of holding it till April."
"It's quite disappointing that RBI has come out with a strongly hawkish policy at a time when growth slowdown has become very acute in the aftermath of demonetisation. Somehow, RBI has not perceived demonetisation as disinflationary, unlike the GOI Economic Survey."
"Shifting policy stance from accommodative to neutral at a time when the government is talking about stimulus doesn't make sense."
"It was a close call. They've preferred to hold on."
"We think there will be very little room for additional cuts."
"Given that inflation is comfortable, it gives us the assurity that one more rate cut is due sometime."
"I think somewhere RBI seems to be probably not accepting the slowdown to be beyond a temporary phenomena and that's triggering a pause in policy."
"Today's rate decision was a close call in the run-up to the policy and the RBI preferred to keep rates on hold, erring on the side of caution on inflation risks. The most significant takeaway was the shift in their policy stance to neutral from accommodative earlier, reaffirming our expectations that we are near the end of the rate easing cycle."
"GDP estimates for FY17 were lowered, but the impact of demonetisation is seen as transitory on inflation and growth. Bond yields are likely to find a floor on a status quo policy and as deposit build-up slows on higher withdrawal limits."
Reporting by Bengaluru and Mumbai newsrooms; Editing by Euan Rocha