The six-member Monetary Policy Committee (MPC) of the RBI unanimously chose to maintain the benchmark repo rate at 6.5% and retained its stance of withdrawal of accommodation.
Headline inflation, after reaching a low of 4.3 per cent in May 2023, rose in June and is expected to surge during July-August led by vegetable prices.
While keeping the interest rate intact, RBI Governor said headline inflation still remains above the central bank's target of 4 per cent.
There is limited room for the RBI to sound dovish as it has explicitly shifted to guide inflation toward the 4 per cent target.
The borrowing cost, which started rising in May last year, has stabilised with the RBI keeping the repo rate unchanged at 6.5 per cent since February when it was raised from 6.25 per cent.
Experts say banks might maintain current interest rates in FDs, however, investors seeking to maximise their returns may remain invested
Prices have started falling in the past few months with retail inflation dropping to an 18-month low of 4.7% in April and 5.66% in March.
The RBI, too, is on hold primarily to assess the impact of its 250 basis points rate hike so far.
Headline inflation is above the target of 4 per cent and expected to remain so during rest of the year says, RBI Governor Shaktikanta Das.