India's Central Bank Holds Rates Again as It Looks to Restore Growth, Inflation Balance

By Kimberley Kao

India's central bank kept its policy rate unchanged as it walks the line between curbing inflation and boosting growth after a surprisingly weak quarter.

Reserve Bank of India Gov. Shaktikanta Das said Friday that the monetary-policy committee decided to maintain its policy repo rate at 6.50%, with four out of six members voting in favor of standing pat.

The committee unanimously decided to continue with a neutral policy stance, taking note of the recent slowdown in growth, the governor said.

The growth outlook is resilient but warrants close monitoring, he added.

That marks an 11th consecutive hold by the Indian central bank, keeping the benchmark rate at the same level it has been at since February 2023.

Economists were divided on what the central bank would do heading into Friday's meeting, with some seeing a strong case for a cut after growth slowed more than expected in the July-September quarter. The majority had called for a hold, pointing to sticky inflation and an increasingly uncertain outlook for the year ahead.

Of the six economists surveyed by The Wall Street Journal, four projected that the RBI would stand pat while two had penciled in a cut.

Expectations that the RBI will soon pivot toward policy easing have been growing, particularly in the wake of cuts by the Federal Reserve and other central banks in Asia. Policymakers at the Indian central bank in October also voted to change their stance on monetary policy to neutral, adding to views that cuts were imminent.

India's economy remains one of the fastest-growing in the region but has lost some momentum. Growth slowed to 5.4% in the July-September quarter from the previous quarter's 6.7% expansion, undershooting the central bank's forecast and marking the slowest pace of growth since the fourth quarter of 2022.

The RBI raised the policy rate by a total of 2.5 percentage points from May 2022 to February 2023 in response to a surge in inflation caused by the Russia-Ukraine war and the recovery from the pandemic.

Inflation in India, Asia's third-largest economy, has been trending lower over the past year, but concerns about volatile food prices persist. Worries about inflation have resurfaced particularly as developments like Middle East tensions and port strikes throw a spotlight on the prospect of commodity price spikes.

Write to Kimberley Kao at kimberley.kao@wsj.com