The Reserve Bank of India’s (RBI) Monetary Policy Committee unanimously decided to keep the repo rate unchanged at 6.5% for the fifth time in a row which was in sync with the consensus view of the market. It was also widely assumed that rate-setting panel will also retain the policy stance unchanged with a focus on the withdrawal of accommodation.
From the RBI Governor’s comments, it can be inferred that the MPC has drawn some comfort on the fact that there has been broad-based easing in core inflation, which also indicates that the RBI monetary policy action has been bearing results of successful disinflation. The Governor though has expressed concern on potential inflation risk which can emanate from food inflation which can lead to an uptick in inflation numbers of November and December.
The tone of the MPC seemed to be well-balanced between controlling inflation on the one hand and retaining the focus on it, while at the same time cautioning against the risk of over-tightening measures that may arise. From the Governor’s statement, we feel that RBI MPC will pause on the rate front up to H1FY25, focussing on liquidity measurement management to ensure liquidity remains neutral to tight in the near term to align to policy stance.
RBI remains comfortable on the growth front and has revised FY24’s real GDP growth at 7% against the previous projection of 6.5%. On the headline CPI inflation, it has maintained the same set of inflation projections at 5.4% for FY24.