New Delhi, October 2024.
The Reserve Bank of India (RBI) announced its fourth bi-monthly monetary policy for FY25 today, October 9. After a three-day meeting of the six-member RBI Monetary Policy Committee (MPC), the RBI Governor Shaktikanta Das announced that the rate-setting panel decided to keep the benchmark repo rate unchanged at 6.5% for the tenth straight meeting. However, the MPC changed the policy stance to ‘Neutral’ from ‘withdrawal of accommodation’. FY25 GDP growth estimates were retained at 7.2%, while CPI Inflation forecast for FY25 remained at 4.5%. Stay tuned to our RBI policy live blog for the latest updates.
“RBI Governor “walks the talk” on managing inflation as their key priority, yet again! Hence, the policy rate was kept unchanged, although the stance was changed to Neutral. His oft repeated statement was, “unambiguously focused on durable alignment of inflation with target, while supporting growth”; signaling clearly that any future rate cut would depend upon the inflation trajectory trending downwards. The Governor’s comfort for the change in stance seemingly stemmed from India’s growth story remaining intact; with private investment & consumption as well as Govt capex expected to pick up in H2, a stronger kharif output & rabi sowing due to a good monsoon lending to a pick-up in rural demand, and a resilient CAD & forex position keeping the INR steady. Hence, he retained the current year GDP growth target at 7.2%, while mentioning that adverse weather conditions and/or accentuated geopolitical conflicts could lead to downside risks for the economy.” Says Manish Kothari, Head – Commercial Banking, Kotak Mahindra Bank Limited.
We continue to see the possibility of a rate cut in Q4 2024. Despite the governors’ emphasis that monetary policy decisions are driven primarily by domestic considerations, we think that any rate cut action could end up being aligned with the timing of the Fed’s rate cut cycle to limit financial market volatility, said Abheek Barua, Chief Economist and Executive Vice President, HDFC Bank.
