India's central bank on Thursday kept its key lending rat unchanged at 6.5% citing easing inflationary pressures.

Reserve Bank of India (RBI) Governor Shaktikanta Das however warned monetary conditions will remain tight for some time.

"The Monetary Policy Committee decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth," Das said.

"Headline inflation still remains above the target, and being within the tolerance band is not enough. Our goal is to achieve the target of 4.0 percent going forward," he added.

Inflation in India peaked at 7.79% in April of 2022 — well above the MPC's target range of two to six percent — before slowly easing to 4.7% in April of 2023. The sudden rise in inflation was mainly due to Russia's invasion of Ukraine and the resultant disruption in global trade and rising international fuel prices. 

Central banks around the world, including the RBI, quickly hiked borrowing rates to tame consumer prices. 

India's hold on rates contrasts with recent central bank actions elsewhere.

Two major central banks -- the Reserve Bank of Australia and the Bank of Canada -- have surprised markets this week by resuming rate hikes to combat stubbornly high inflation.

Das warned the El Nino weather phenomenon, which is expected to weaken monsoons and lift crop prices, posed a risk to inflation.

"Close and continued vigil on the evolving inflation outlook is absolutely necessary, especially as the monsoon outlook and the impact of El Nino remain uncertain," Das said.

Other upside risks include geopolitical tensions, international commodity prices and the volatility in global financial markets, he said.

Headline inflation was projected to hit 5.1% in the 2023-24 financial year.

The governor further retained the nation's growth expectation for financial year 2023-24 to 6.5%. 

mk/lo (AFP, Reuters)