In line with expectations, the RBI maintained the status quo on monetary policy rate along with the stance.
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The RBI maintained the 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 projects FY25 GDP growth and CPI inflation at 7.0% and 4.5% respectively. We expect monetary policy to remain cautious while ensuring that the last mile of disinflationary process is complete. As such, we maintain our call for an extended pause until Aug-24, with the central bank opting for a pivot thereafter as visibility on the durability of the 4% inflation target gets better. The stance of gradual calibration of core liquidity surplus would remain tied to the monetary policy signal to ensure complete transmission of past rate actions. This is likely to ease by mid FY25 with conditions turning favorable for monetary policy easing. We maintain our view of moderation in 10Y g-sec yield towards 7.00% levels by Mar-24, and further towards 6.50% by Mar-25.