RBI has unexpectedly kept interest rates on hold on Thursday, amid a recent rise in retail consumer prices and said it would ensure inflation remains within target going forward. The repo rate currently stands at 4.0% and the reverse repo rate at 3.35%.

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Two-thirds of analysts in a Reuters poll had predicted a 25 basis point cut in the repo rate, while the rest saw no change.

COMMENTARY
RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL HOLDINGS, MUMBAI
"The policy is balanced and in right direction. While conserving the rate reduction space for later use, the Monetary Policy Committee (MPC) has continued to provide the support on the liquidity front. Doing away with the loan moratorium and announcing a responsible scheme for restructuring of the stressed assets are both prudent and wise from the perspective of financial stability."

GARIMA KAPOOR, ECONOMIST - INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI
"Taking cues from the recent high inflation prints, the MPC decided to keep policy repo rate unchanged at 4% while maintaining an accommodative stance. While it is clear that the recent rise in inflation print to above 6% is transient and a reflection of supply related disruptions and not revival in demand, MPC`s legal mandate compelled it to hold rates."

"While today`s decision has come as a surprise to us, we believe slack in the economy amid easing inflation rate will provide MPC space to cut policy rate by 25-50 bps in H2FY21. The Reserve Bank of India (RBI) looks keen to preserve its ammo for H2FY21, should growth show incremental signs of faltering. "

SHILAN SHAH, SENIOR INDIA ECONOMIST, CAPITAL ECONOMICS, SINGAPORE
"Our view is that inflation will drop sharply over the coming months as the collapse in demand more than offsets supply constraints. More importantly, the outlook for economic growth is bleak as confirmed coronavirus cases continue to rise. Several high-frequency indicators such as the July PMIs show that the post-lockdown recovery has stalled before it ever really got going."

"All of this augurs for further policy loosening. Indeed, the RBI has maintained its "accommodative" policy stance today and Governor (Shaktikanta) Das stated that further policy space is available. We are still forecasting a further 50bp of cuts before the end of the year. Policy could be loosened even further if the growth outlook continues to worsen."

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU
"The MPC was unanimous with the decision to hold rate unchanged at 4%. Expectedly, the accommodation stance is retained as well, as the economy is showing signs of weakness despite exiting from the lockdown."

"As we have been saying, surging inflation will flatten the recovery curve, the RBI governor too stated that "surge in COVID-19 cases has subdued early signs of revival."

"He also endorsed our view of supply chain disruption impacting inflation. Not surprisingly, the central decided to wait for inflation to cool before taking further action to boost a fragile economy. Like us they expect inflation to cool off during 2HFY21 which raises a probability of a rate cut during 4Q20."

UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
"MPC`s caution on uncertainty on inflation trajectory suggests that chances of further easing will henceforth remain a function of the evolution of supply-side shocks. We see the next few readings still elevated near 6% and hence we do not see any rate easing in at least the October meeting."

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"On a positive note, the other regulatory and development measures announced today will go a long way in ensuring financial stability."