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.