The Reserve Bank of India (RBI) on Friday held interest rates for the eighth consecutive time even as one more monetary policy committee (MPC) member called for a reduction in borrowing costs.

After a three-day meeting, the panel kept the repo rate — the rate at which the RBI lends to banks — unchanged at 6.50 per cent.

The status quo on rates means EMIs on home and car loans will remain unchanged.

However, unlike the recent deliberations where five of the six MPC members voted for a pause in the repo rate, one more participant dissented this time.

In February, external MPC member J.R. Varma had voted to slash the repo rate by 25 basis points.

He was joined by Ashima Goyal who in the past meeting had veered towards a reduction.

The minutes of the previous MPC meeting in April quotes Goyal as saying that a rapid rise in repo rates between May 2022 and February 2023, as well as government supply-side action, helped anchor inflation expectations.

“Partly as a result, commodity shocks were transient in 2023. This transience suggests it is not necessary to keep rates high because of expected future shocks,’’ the minutes said.

While her views will be known when meeting minutes are released after a fortnight, she joined ranks with Varma on changing the monetary policy stance to neutral.

RBI governor Shaktikanta Das continued to strike a relatively hawkish tone when he said the MPC would want CPI inflation to align with the medium-term target of 4 per cent on a durable basis.

“At the current juncture, the uncertainties related to the food price outlook warrant close monitoring, especially their spillover risks to headline inflation. In parallel, the behaviour of the core component also needs to be watched carefully. We need a descent of inflation to the 4 per cent target on a durable basis, while supporting growth,’’ he said.

With few central banks such as the European Central Bank cutting rates and the US Fed expected to follow suit, Das reiterated that the RBI will not blindly follow their actions.

``There is a view that in matters of monetary policy, the Reserve Bank is guided by the principle of ‘follow the Fed’.

“I would like to unambiguously state that while we do keep a watch on whether clouds are building up or clearing out in the distant horizon, we play the game according to the local weather and pitch conditions.”

“In other words, while we do consider the impact of monetary policy in advanced economies on Indian markets, our actions are primarily determined by domestic growth-inflation conditions and the outlook,’’ he said.

4% inflation

Speaking to the press, Das said the RBI may consider “further policy actions” only if the headline inflation stays at 4 per cent.

“It (inflation) has to align with the target and once it reaches 4 per cent, it has to stay there. When we feel confident that this will stay at 4 per cent and won’t go up, then we will think about further monetary policy actions,” he said.

Yet with two members of the monetary policy committee calling for a rate cut, optimism of a rate cut has grown.

An analyst said that the RBI could change the stance to neutral in its next meeting and “we could get the first rate cut in October”.

Earlier, the expectation in markets was that any reduction in the policy rates will happen only in December or in 2025.