The pundits are carefully parsing Reserve Bank of India (RBI) governor Shaktikanta Das’s “pause not a pivot” statement — but very few are prepared to buy his nuanced position that the central bank is not signalling the end of the rate hike cycle that began in May last year.

On Thursday, the interest rate setting panel of the RBI surprisingly kept the repo rate unchanged at 6.50 per cent after hiking it 250 basis points on six occasions since May.

In a televised address, Das had suggested the central bank could still raise rates if the situation warrants such an action. "Let me emphasise that the decision to pause on the repo rate is for this meeting only.’’

Later at a press conference, Das sought to amplify this remark: "If I have to characterise today’s monetary policy in just one line. I would say as follows. It’s a pause, not `a pivot.”

While Das may be attempting to convey to the markets the rate hike cycle is not over, analysts feel otherwise.

“We believe the window for hikes has closed,” said Rahul Bajoria, head of EM Asia (ex-China) economics at Barclays. “As such, we no longer expect any further rate hikes from the MPC (monetary policy committee) in 2023-24.”

Brokerage Emkay Global Financial Services held similar views.

“Three things that stood out for us in this MPC policy — the shift in the weightage of policy reaction function to external world policy dynamics, insistence on keeping an open-ended policy with no change in stance and reinforcing the inflation-fighting credibility but acknowledging its moderation ahead,’’ Emkay said.

"While we were reluctantly looking for a token dovish hike and a pause ahead, we think Thursday’s action appears to hint at a pause for good especially as the ex-ante real rate is looking around 1.3 per cent — keeping our oneyear forward inflation forecast as an anchor,” it added.

A note from Standard Chartered Bank India said: "MPC is unlikely to see the need to hike rates further unless inflation once again moves above or closer to the upper threshold. If such a scenario arises, the monetary policy hiking cycle may resume, beyond just one hike of 25 basis points’’.

Economists at Kotak Institutional Equities also feel that though the RBI has shown its "readiness to act’’, the bar for incremental rate hikes has been set very high. This is because domestic inflation is expected to remain below 6 per cent levels in the current fiscal.

Pivot remark

The one question observers are asking is why did Das talk about a pivot when he did not use the expression in his morning address.

One view is that it may be a coded message to the bond markets where the 10-year bond — 7.26 per cent 2032 — yield had tumbled to 7.15 per cent soon after the market learnt about the pause in rates.

Recently, the domestic debt market had seen an inversion in the yield (interest rate) curve, where the yields on shorter-term securities are higher than the long-term yield.

The US has already seen a yield inversion which many read as an indication of a possible recession in the economy.

After the “pivot” message went out, the rate on the 10-year bond rose to 7.21 per cent at the close which was nearly 7 basis points lower than the previous close.

However, there was a rally in the market for short-term bonds, which react more to interest rate expectations.

Yields on the 5-year bond yield closed at 7.05 per cent, after falling to a low of 7.01 per cent against the previous close of 7.15 per cent.

Bond market circles feel with expectations of pause gaining ground, yields on short-term securities are now likely to see a sharper fall than the 10-year paper.

Viewpoint

■ RBI will link future rate moves to inflation, which is expected to moderate

■ Real interest rate is marginally above central bank’s expectations of 1%

■ Governor Shaktikanta Das’s pivot remark was probably meant to reverse the trend in inversion of yields, considered a sign of recession