India Leaves Key Interest Rates Unchanged at 5.25%

India left benchmark interest rates steady as the Middle East conflict further weighed on inflationary pressures.The Reserve Bank of India decided to keep the policy repo rate unchanged at 5.25%, according to a Wednesday press release.The decision was in line with the forecast made by 69 out of 71 analysts surveyed by Reuters.The RBI's Monetary Policy Committee considered the disruption brought by the war in Iran, as the closure of the Strait of Hormuz triggered oil price shocks. The spike in energy and commodity prices is likely to lift inflation, prompting the central bank to predict the consumer price index for the fiscal year of 2026-2027 to be at 4.6%, with the first-quarter CPI at 4%.The expected first-quarter CPI would be a jump from the February CPI of 3.21% and January's 2.74%.The U.S. and Iran only recently reached a deal to suspend the missile attacks for two weeks after President Donald Trump threatened to wipe out Iran unless it reopens the Strait of Hormuz. Shares of state-owned Indian Oil Corporation (NSE:IOC, BOM:530965) soared less than 7% following the news of the 11th-hour ceasefire agreement, which brought down oil prices below $100 per barrel."The MPC opined that the intensity and the duration of the conflict and the resultant damage to the energy and other infrastructure add risk to the inflation and growth outlooks," RBI Governor Sanjay Malhotra said in a statement. "However, the fundamentals of the Indian economy are on a stronger footing, providing it with greater resilience to withstand shocks now than in the past."Moreover, the central bank lowered its real gross domestic product outlook for the fiscal year to 6.9% from 7.6%, with the first-quarter GDP predicted at 6.8%.ANZ expected that Asian countries, including India, would keep interest rates at bay to quell the impact of inflation and price pressures."We do not doubt that growth in the region will weaken but, at the same time, we are mindful that a non-reactive policy stance that aims to sustain demand, risks second-order inflation and higher inflation expectations," ANZ Chief Economist Sanjay Mathur and Asia Economist Krystal Tan said in a Wednesday note.

-- India left benchmark interest rates steady as the Middle East conflict further weighed on inflationary pressures.

The Reserve Bank of India decided to keep the policy repo rate unchanged at 5.25%, according to a Wednesday press release.

The decision was in line with the forecast made by 69 out of 71 analysts surveyed by Reuters.

The RBI's Monetary Policy Committee considered the disruption brought by the war in Iran, as the closure of the Strait of Hormuz triggered oil price shocks. The spike in energy and commodity prices is likely to lift inflation, prompting the central bank to predict the consumer price index for the fiscal year of 2026-2027 to be at 4.6%, with the first-quarter CPI at 4%.

The expected first-quarter CPI would be a jump from the February CPI of 3.21% and January's 2.74%.

The U.S. and Iran only recently reached a deal to suspend the missile attacks for two weeks after President Donald Trump threatened to wipe out Iran unless it reopens the Strait of Hormuz. Shares of state-owned Indian Oil Corporation (NSE:IOC, BOM:530965) soared less than 7% following the news of the 11th-hour ceasefire agreement, which brought down oil prices below $100 per barrel.

"The MPC opined that the intensity and the duration of the conflict and the resultant damage to the energy and other infrastructure add risk to the inflation and growth outlooks," RBI Governor Sanjay Malhotra said in a statement. "However, the fundamentals of the Indian economy are on a stronger footing, providing it with greater resilience to withstand shocks now than in the past."

Moreover, the central bank lowered its real gross domestic product outlook for the fiscal year to 6.9% from 7.6%, with the first-quarter GDP predicted at 6.8%.

ANZ expected that Asian countries, including India, would keep interest rates at bay to quell the impact of inflation and price pressures.

"We do not doubt that growth in the region will weaken but, at the same time, we are mindful that a non-reactive policy stance that aims to sustain demand, risks second-order inflation and higher inflation expectations," ANZ Chief Economist Sanjay Mathur and Asia Economist Krystal Tan said in a Wednesday note.