Indian Rupee: Dovish MPC hold supports prolonged pause – Standard Chartered

Standard Chartered Bank economists Saurav Anand and Anubhuti Sahay note that India’s Monetary Policy Committee (MPC) kept the repo rate at 5.25% with a neutral stance, sounding more dovish than in April and June. The committee cut its FY27 CPI and core inflation forecasts, raised its GDP outlook, and appears comfortable with inflation, suggesting a prolonged pause in rates barring major upside surprises.

MPC comfort on inflation underpins rate pause

"India’s Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.25% in a unanimous decision and maintained its neutral stance, broadly in line with our and consensus expectations."

"However, we were surprised by the relatively dovish tone of the MPC’s statement compared with the April and June policy meetings."

"Overall, while the MPC remains vigilant on future risks, particularly El Niño and crude oil prices, it is inclined to wait for greater clarity on the inflation trajectory and composition before considering rate action."

"For now, the bar for rate hikes appears high unless inflation materially exceeds expectations."

"This is consistent with our baseline view of no change in the repo rate in FY27."