Jaipur, June 07, 2024.
The Reserve Bank of India (RBI) Governor Shaktikanta Das announced the second bi-monthly monetary policy of the financial year 2024-25 on Friday. This is the first RBI policy after the Lok Sabha election results 2024. The RBI Governor headed six-member Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 6.5% for the eight consecutive time by a 4:2 majority. It also decided to continue with its stance of ‘withdrawal of accommodation’. RBI raised its GDP growth forecast for FY25 to 7.2% from 7% earlier. The central bank retained FY25 inflation forecast at 4.5%. Stay tuned to the RBI MPC Meeting Live blog for the latest updates.
The Fed has elbow room to pursue tight monetary policy because growth in the US is robust, while Europe is on the other side, with growth concerns amid elevated inflation. The RBI, too, has policy space to keep rates higher and rein in CPI inflation to its stated goal of ~4%. Our base case is a normal monsoon trimming the headline to 4.5%. The RBI has kept its inflation forecast this fiscal unchanged at 4.5%. However, it remains more optimistic of growth, revising up GDP growth by 20 basis points to 7.2%. CRISIL’s estimate is a tad lower at 6.8%. We now see the RBI cutting rates starting October and have lowered our expectation to two rate cuts against three foreseen earlier, said Dharmakirti Joshi, Chief Economist, CRISIL Ltd.
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank Said” RBI’s status quo on rates and stance was in line with market expectations, but the split in voting patterns clearly shows the increasing probability towards a pivot in the policies ahead. However, we believe the robust growth will give enough opportunity for the MPC to remain on a wait and watch mode until better clarity comes from monsoons and quality of expenditure from the Budget. We see room for stance change in the August policy with a plausible easing from October meeting.”
