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.
Devang Shah, Head Fixed Income, Axis Mutual
Fund Said ‘’Market
reaction has remained muted as monetary policy was status quo and there was no
mention of OMO sales or any other liquidity measures. We believe that if
monsoons are on track and food inflation subsides, there is a very high
probability of RBI changing its course on monetary policy from October policy.
We expect RBI to deliver about 50 bps of rate cut in this cycle and suggest
clients to hold duration in their portfolio.
Shanti Ekambaram, Deputy
Managing Director, Kotak Mahindra Bank, said "The MPC's
decision to maintain status quo on policy rates and stance underscores their
commitment to managing inflation and ensuring price stability. With food
inflation contributing 46% of the total inflation basket, it's critical to
address this to prevent spillover risks to core inflation. Growth remains
resilient, with steady urban consumption, emerging rural demand, stable
manufacturing, and buoyant services growth projected over the next three
quarters. The expectation of a normal monsoon further supports stability in
agriculture.
In light of global financial market volatility,
divergent stances by central banks worldwide, resilient domestic growth, and
higher food inflation, the MPC's decision to keep rates unchanged is prudent.
The MPC’s focus on maintaining price stability and targeting sustainable
inflation of 4% is clear. Seems like we must remain patient regarding any
potential changes in stance or rate cuts."
“The RBI expectedly
kept rates and stance unchanged with unambiguous focus being retained on
inflation. With growth remaining robust the MPC still has room to hold on to
policy stance to get confirmation on the disinflationary trend. We continue to
expect scope for change in stance in the October policy with rate cuts
beginning from December. The prospects of simultaneous change in stance and
rate cuts could increase depending on how domestic inflation and global
environment transitions.” Said
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.
RBI's decision to keep the repo rate unchanged
demonstrates a balanced approach to nurturing economic stability and growth. By
prioritizing price stability and supporting investment, RBI aims to create a
resilient economic environment capable of sustaining growth and withstanding
external shocks. This prudent policy stance is expected to bolster investor
confidence and contribute to India's economic resilience in the coming year,
said Ashwani Dhanawat, Executive Director
and Chief Investment Officer, Shriram General Insurance.