New Delhi, August 2024.
The RBI Governor-headed six-member Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 6.5% and maintain the policy stance of ‘withdrawal of accommodation’. The MPC voted by a 4 to 2 majority to keep the policy rate unchanged. RBI retained real GDP growth estimates for FY25 at 7.2%, and CPI inflation projection at 4.5%. Stay tuned to our RBI policy.
Rupee is steady around 83.92 levels after the RBI kept rates steady at 6.50% at the policy meet. The dollar index after the positive sessions, today experienced a minor pull back and reading around 103.05.
“The central bank maintained an inflation projection for FY25 at 4.5%, stating that high food price momentum is expected to have persisted through July. Since the RBI is concerned with a mild uptick in inflation in the near term, we don’t expect a rate cut at the coming meeting too. The WTI crude oil, after four weeks of weakness, has shown first signs of the pull back, hurting the rupee sentiment. The range for the USDINR will be 83.85 – 84.10 and the bias is expected to be positive for the pair,” said Jigar Trivedi, Senior Research Analyst – Currencies & Commodities at Reliance Securities .
“RBI’s decision to hold the repo rate at 6.5% for the ninth consecutive time was on expected lines amid persistent inflationary pressures with June inflation coming in at 5.1%, and food in particular running away at 8.4%. We need to watch out for Fed action in September when a rate cut is near certain which will set the stage for our own likely cut by December. RBI’s commitment to inflation target of 4% while our GDP growth is on track I seems the right thing to do.” Said Anu Aggarwal, Head – Corporate Banking, Kotak Mahindra Bank.
This settles all the noise regarding expectations of stance change given a lower core inflation. RBI’s unchanged inflation projection for FY25 instills our confidence that inflation continues to remain on a declining trajectory with current food shocks to be transitory. This along with developing global monetary policy dynamics around expectations of FED monetary pivot in September-24, creates a space for our expectations of a domestic monetary policy pivot in December-24. We expect a stance change in October-24 given inflation remains on track, said Prashant Pimple, CIO-Fixed Income, Baroda BNP Paribas Mutual Fund.
