In line with expectations, the RBI maintained status quo on monetary policy rate with Repo rate maintained at 6.5% along with the ‘withdrawal of accommodation’ stance

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Jun 07, 2024

QuantEco Research || RBI Policy - Patiently cruising

Repo rate remained unchanged at 6.50% with policy stance continuing to focus on “withdrawal of accommodation”. Notably, 2 out of 6 MPC members voted for a 25 bps cut along with a change in policy stance to “neutral”. The central bank raised its forecast of FY25 GDP growth by 20 bps to 7.2%, while retaining its CPI inflation estimate of 4.5%. We expect a gradual move towards a pivot as (i) growth is likely to disappoint in FY25, (ii) inflation is expected to decelerate further towards 4% in FY26, (iii) one-third of MPC has turned dovish, and (iv) recent rate cuts by the BoC and ECB underscore the point that monetary easing need not wait till inflation target is reached. We continue to expect the MPC to persist with its anti-inflation posture in the next policy review in Aug-24. A pivot towards easing is likely in the subsequent policy review in Oct-24 with a 25 bps cut.