In line with expectations, the RBI maintained status quo on monetary policy rate along with the stance with repo rate unchanged at 6.50% and policy stance continuing to focus on “withdrawal of accommodation”.
Download ReportQuantEco Research || RBI Policy - Not Ready to Pivot Yet
Out of 6 MPC members, 2 once again opted to vote for a rate cut along with a shift in policy stance to ‘neutral’. The central bank retained its FY25 GDP growth and CPI inflation forecast of 7.2% and 4.5% respectively. While India’s economy is stable, prompting the RBI to stay put, we believe that the central bank will gradually move towards a pivot as (i) inflation is expected to decelerate further towards 4% in FY26, (ii) for the first time in the post COVID phase, the RBI has projected two consecutive quarters of sub 4.5% inflation in Q4 FY25 and Q1 FY26, (iii) one-third of MPC has retained its dovishness, (iv) recent rate cuts by the BoC, ECB, and the BoE underscore the point that monetary easing need not wait till inflation target is reached, and (v) there is now greater visibility on the Fed pivot. Conditional upon the anticipated comfort on food inflation, we continue to expect the MPC to pivot in Q3 FY25 and look for a cumulative of 50 bps rate cut before Mar-25.