In line with expectations, the RBI maintained status quo on monetary policy rate at 6.50% along with the ‘withdrawal of accomodation’ stance
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In line with expectations, the RBI maintained status quo on monetary policy rate along with the stance. As such, repo rate remains unchanged at 6.50% with policy stance continuing to focus on “withdrawal of accommodation”. The central bank retained its FY24 GDP growth forecast of 6.5% while expectedly revising its CPI inflation higher by 30 bps to 5.4%. The upside in Jun-23 CPI inflation, which is expected to intensify over Jul-Aug-23 owing to Tomato and other food price pressures, has prompted this upward revision to full year inflation projection. Further risks to inflation outlook could emerge from - uneven distribution of Southwest monsoon, backloaded impact of El Nino in the season possibly on crop yields along with recent hardening of global commodity prices. Overall, we continue to expect the MPC to remain on extended pause through the course of FY24. This is likely to be accompanied by a guarded undertone to allow for complete transmission of past rate actions and also to dissuade premature market expectations of a policy pivot as long as inflation projections continue to remain above 5% on consistent basis.