Reacting to the RBI Policy, VR Iyer, CMD, Bank of India stated, “status quo in policy rates is indeed a pleasant surprise. Now, banks may not feel the need for an immediate hike in base rates.
By maintaining status quo in key policy rates, RBI has surprised the market which has been expecting at least a 25 bps hike. The decision not to hike rates may be due to be belief that the rise in food inflation may not be sustained going forward. Moreover, by not resorting to a rate hike despite high levels of retail and wholesale inflation, RBI has indirectly hinted that growth is also a key consideration in its policy stance. Besides, it has also hinted that an over-reactive policy stance is not warranted since the impact of previous policy actions come with a lag.”