Most respondents expect rate cuts from Dec; change in stance unlikely
A debate on real interest rate has picked up steam as the repo rate has been kept unchanged at 6.5 per cent since February 2023 despite inflation prints showing a downward trend
Internal members, however, cited food inflation risk for maintaining the status quo and said the last mile of disinflation has been slow
Food prices tend to obstruct the disinflation process
India Inc welcomed the Reserve Bank's move to raise the growth outlook for FY25 and stated that it expects the Reserve Bank to reduce the key repo rate when inflation stabilises within its target band. The Reserve Bank, which has been mandated to ensure inflation remains at 4 per cent (with a margin of 2 per cent on either side), mainly factors in CPI while arriving at its monetary policy. It left the key interest rate unchanged as widely expected, keeping the focus on inflation amid robust economic growth that is likely to provide the new Modi government headroom for manoeuvring reforms. The central bank also retained its projection for retail inflation at 4.5 per cent for the current fiscal assuming a normal monsoon, while emphasising that uncertainties related to food price outlook warrant a close monitoring. Consumer Price Index (CPI)-based retail inflation has been projected at 4.5 per cent with quarter-wise projections at 4.9 per cent in Q1 (April-June), 3.8 per cent in Q2, 4
The decision to maintain the repo rate and raise the GDP forecast was made during the Monetary Policy Committee meeting held between June 5 and June 7
RBI Monetary Policy Committee meeting LIVE updates: Economists expect the central bank to maintain the repo rate at 6.5 per cent for the eighth consecutive time
The expectations for the RBI panel to begin cutting interest rates soon are there, however, the exact timing remains uncertain
The BoE said on Thursday its Monetary Policy Committee voted 7-2 to keep rates at a 16-year high of 5.25% after Deputy Governor Dave Ramsden joined Swati Dhingra in voting for a cut to 5%
US inflation is altering expectations
Food prices are disrupting the disinflation process
No respite from US inflation and geopolitical tensions
FMCG companies have also witnessed a pick-up in rural areas.
Manish Raj Singhania, prez of FADA, said that favourable govt policies along with government spending, and the expected good monsoons, are likely to fuel demand, particularly in rural areas this year
Climate issues can complicate monetary policy
RBI monetary policy: In no hurry to cut repo rate, MPC keeps status quo; retains FY25 growth, inflation forecasts
Five of the six members of the RBI's MPC panel have voted for the status quo on both the policy rate and stance
Attempts to clear impression about widespread action; curbs only against outliers for major breaches
RBI MPC highlights: Catch all the highlights related to RBI's Monetary Policy Committee announcements here
The RBI projects CPI will be 4.5 per cent for the whole year, and growth will be 7%