RBI Governor Shaktikanta Das on Wednesday said the confidence in inflation cooling down in the near future, resulting in a better balance between growth and price rise, led the central bank to change the policy stance to neutral.
He, however, made it clear that there are "significant risks" to inflation like the ones arising out of geopolitical tensions, and it is "not appropriate" to talk about a rate cut for now.
On whether the change in stance to 'neutral' from earlier 'withdrawal of accommodation' should be seen as the RBI's pivoting, he said that it is for others to assess.
"We have changed the stance at the moment because we see that growth and inflation, they are well poised, the balance is well poised. So, the MPC (monetary policy committee) considered it appropriate, the timing is appropriate to shift the stance to neutral," he told reporters at the customary post-policy review.
"We have now greater confidence that inflation is moderating, but we are acutely aware that there are significant risks," he said, adding that the change in stance gives greater flexibility and optionality to the rate-setting panel to manoeuvre in the future on rates.
Earlier in the day, the RBI held its interest rates for the tenth consecutive time but changed the stance, igniting hopes of a decrease in rates.
There was "no point" and "justification" in continuing with the earlier, as the RBI has achieved what it wanted to, Das said, adding that the future is full of "uncertainties".
"These uncertainties and the risks cannot be underestimated. It will be inappropriate, it will not be appropriate to specifically sort of talk in terms of timing of a rate cut," he said.
Using the horse bolting out from the stable analogy deployed earlier to illustrate the inflation fight, Das said the RBI needs to be "very careful" about opening the gate of the stable.
When asked if we should look forward to a rate cut at the next policy review in December or even earlier, Deputy Governor Michael Patra said the whole attention is focused on the near-term hump in inflation, wherein the RBI expects the October number to come at over 5 per cent.
The RBI will focus on the near-term hump on the inflation before even thinking of the "next move", Patra said.
The central bank has decreased its estimate on crude oil prices to USD 80 per barrel from USD 85 per barrel earlier because of the softer medium-term outlook on the commodity.
The DG said the oil-producing countries have committed to continue with supply at higher levels into 2025, expectations of lower demand made by the International Energy Agency and growing reliance on renewable energy sources.
