Reserve Bank Governor Urjit Patel Friday said the two consecutive rate hikes earlier and its lower inflation forecasts made it to go in for a surprising status quo and shift the policy stance to "calibrated tightening".
The surprise move left the market and the rupee bleeding, as the RBI watchers were expecting a rate hike to stem slide in the rupee, which plummeted to a new low of 74.23 to the US dollar in intra-day trade.
Given the shift in policy stance from "neutral", a rate cut is off the table and one should expect only a status quo or a hike going forward, the monetary authority said, dismissing the interpretation of Friday's status quo as a deferred rate hike.
Patel said the stance has been changed to "calibrated tightening" from "neutral" because the RBI feels that the risks are "tilted to the upside".
Defending the status quo, Patel said, "Please recall that we had two rate hikes in the space of two months...we are not bound to increase rates at every meeting because that is not required given our inflation outlook and forecast at this point of time."