Capital markets barely reacted to the Reserve Bank of India’s (RBI) credit policy review, and the expectation of a status quo was met firmly. While keeping rates unchanged, the RBI governor maintained that the overall policy stance remains accommodative, which means that the central bank is looking for room to ease or reduce rates and will do so when the opportunity presents itself. For now, the April data on inflation is the one that impacted the decision to leave rates unchanged. April Consumer Price Index inflation came in at 5.4%, surprising the market and RBI, as the central bank governor admitted. In the past two years, RBI has maintained that its primary focus will be on meeting inflation targets over a period of time.
