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”.
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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 maintained its forecast of FY25 GDP growth and CPI inflation at 7.0% and 4.5% respectively. We expect monetary policy to remain cautious on risks from rise in oil prices and a potential flare up in price of horticulture items due to anticipated heat waves. Borrowing from Swami Vivekananda, while it appears that the MPC would not stop till the goal is reached (i.e., maintain an anti-inflationary disposition till inflation aligns with its target on a durable basis), the projected decline in inflation to 4.5% in FY25 and further towards 4.0% in FY26 would create headroom for calibrating the nominal policy rate. We maintain our call for the first rate cut in Aug-24, contingent upon a normal south-west monsoon outturn and the anticipated Fed pivot in Jun-24. The stance of gradual calibration of core liquidity surplus would remain tied to the monetary policy signal to ensure complete transmission. We maintain our view of moderation in 10Y g-sec yield towards 6.50% by Mar-25.