India joins Bank of Canada and RBA in pausing rate hikes. RBA’s decision disappointed economists who expected a 25bps hike, marking its first pause since May 2022.
First it was the Bank of Canada which in January announced it would pause its rate hike campaign; then earlier this week the RBA became the second bank to join the bandwagon when it put its year-long hiking campaign on pause after leaving the cash rate unchanged at 3.6% at April’s Board meeting, marking the first pause since the RBA starting raising rates in May 2022, and disappointing a majority of economists who expected at least a 25bps hike.
So fast forward to today, when the Reserve Bank of India became the third (but certainly not last) central bank to surprise markets by pausing its tightening campaign when it held its key repo rate steady on Thursday (consensus was for another 25bps) after six consecutive hikes, saying it was closely monitoring the impact of recent global financial turbulence on the economy and wants to see the impact of the 250 basis points of hikes it has delivered so far.
The monetary policy committee (MPC), comprising three members from the central bank and three external members, retained the key lending rate or the repo rate at 6.50%.
The decision to hold interest rates steady was unanimous in contrast to the last decision when four members had voted for a hike in rates. Five of the six committee voted in favour of continuing with the stance of “withdrawal of accommodation”, while one member dissented.
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