(Reuters) – The Reserve Bank of India maintained its key lending rate at an all-time low on Thursday. However, it shocked markets by keeping its key deposit rate the same despite economists’ expectations of a rise to align it with short-term cash market rates.

The lending rate (or repo rate) was held at 4% by monetary policy. Also, the reverse repo rate (or key borrowing rate) was maintained at 3.35%.

MPC unanimously voted to keep the status quo in repo rates and majority 5-1 for accommodative policies.

In a Reuters poll, respondents were evenly split about the timing of the repo rates rise. A little more than half (17 of 32) expected a 25 basis point increase to 4.25% by April.

COMMENTARY

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU

“The RBI maintained the stance of accommodative in order to maintain policy support on an ongoing basis.”

The RBI project FY22-23 real GDP growth was 7.8%. That is significantly lower than what the official forecast of between 8.0%-8.5%. It is higher than the 7.0% we estimated, but it shows a more circumspect central bank as well as the RBI’s willingness to be prudent.

It is possible that RBI will not raise the policy rate in April, but it could push it to June. However, it would be consistent with our expectations of a Q2 22 hike.

The central bank may also find some consolation in the fact that Q421 is similar to our expectation for inflation to peak. However, continuing to ignore inflationary tension for too long may come with a heavy price. The central bank could eventually opt to be more strict in tightening the monetary policy and thereby limiting growth.

GARIMA KAPOOR, ECONOMIST – INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

Faced with a hard choice between global tightening and sticky inflation, and normalization of policy rate policy, and keeping the yields down amid record high government borrowing program for FY23, we expected that the MPC would retain both reverse and policy repo rates. However, it also retained an accommodating stance to sustain growth.

The decision was prompted by “the recent stress in bond markets, the comfort with medium-term inflation outlook, and the need to address uneven domestic development.” Now, we expect the RBI to raise its reverse repo rate for Q1FY23 and then increase it again for Q3FY23.

PARTH NYATI FOUNDER TRADINGO MUMBAI

It was expected that the RBI would raise its reverse repo rates and change its stance towards neutral, but instead it maintained its present stance.

The RBI is confident that inflation will soon peak and continues support for the economy. The market generally views it as positive, however it is important to observe how it is interpreted by the market. Otherwise there may be risk that the RBI could continue to trail the inflation curve.

RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL HOLDINGS, MUMBAI

“The MPC is trying avoid an immediate reaction to fixed income markets. It keeps the policy rate at zero and the stance at accommodative steady. These measures may allow banks to limit their market losses during the quarter.

Market participants already move towards normalization following signals from the global economy, and actions by the global central bank. The market will feel a temporary lift from today’s announcement of monetary policy.