Amid continued tensions in West Asia and fears that a weak monsoon could lift food prices in the months ahead, Reserve Bank of India (RBI) Governor Sanjay Malhotra said that the central bank has kept the repo rate unchanged at 5.25%. The Standing Deposit Facility (SDF) rate and Marginal Standing Facility (MSF) rate and the bank rate were also kept unchanged at 5% and 5.25%, respectively.

The RBI boss said the MPC unanimously decided to maintain a neutral stance to be able to keep a close watch on upcoming economic developments. “MPC unanimously decided in favour of status quo on policy interest rate with neutral stance,” Governor Malhotra said.

The RBI’s monetary policy committee met this week, with the repo rate widely expected to remain unchanged. Economists expected the MPC to stay cautious as it weighs global oil prices, weather-related risks and earlier pressure on the rupee against the US dollar.

At the same time, strong FCNR (B), or foreign currency non-resident, deposit flows are expected to give the central bank some comfort by helping strengthen foreign exchange reserves. In this backdrop, the MPC may maintain the status quo while pushing any possibility of a rate hike to a later date. In the June MPC meeting, the repo rate was left unchanged at 5.25 per cent, while the central bank announced several measures to boost foreign institutional investor flows into the country.