RBI Monetary Policy Announcement Today Live Updates: The Reserve Bank of India’s Monetary Policy Committee on Friday unanimously decided to keep the key interest rates unchanged at 6.50 per cent. The RBI MPC headed by Governor Shaktikanta Das announced the committee’s decision after a three-day meeting that started on April 3. The RBI’s MPC voted by a 5:1 majority to keep key rates unchanged at 6.50 per cent. The policy stance is also maintained at ‘withdrawal of accommodation’, said Shaktikanta Das.
“This is the first monetary policy of FY25,” says RBI Governor Shaktikanta Das as he starts his speech after a three-day MPC meeting.
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“We expect MPC to remain on a pause in April policy amid strong GDP growth and continued focus on the 4 per cent headline inflation target. The risks of food inflation remain active and as such MPC may remain cautious. More importantly, we do not expect the MPC to cut rates before the Fed’s rate cut cycle begins. We expect MPC to cut repo rate by Q3FY25; as two factors are likely to align by then 1) India headline inflation is expected to be closer to 4 per cent and 2) Fed’s rate cut cycle may have commenced. With respect to GDP growth, the Q3FY24 GDP growth and full year growth, RBI will look to upward revise the FY24 as well as FY25 GDP growth estimate. We expect the inflation estimate to remain unchanged.”
– Garima Kapoor, Economist & Senior VP, Elara Capital
“RBI has undone the stealth tightening by actively managing the liquidity in the system and the average call rates are now close to the repo rate. Strong growth in FY24 and strong growth projections for FY25, gives leeway to RBI to wait for actual monetary easing in advanced economies. With 1 year forward real rates upwards of 2 per cent, based on FY25 inflation forecast, there is a case to change the monetary policy stance to “neutral”, since the stealth tightening undertaken from second quarter of FY 2024 being undone, RBI may keep rates unchanged and continue with “withdrawal of accommodation” monetary policy stance.”
The bond market will solely focus on the tone of the RBI Governor. The benchmark 10-year Bond 7.0934% and the bond-yield have been cautious ahead of the Policy announcement. Any change in the RBI’s tone is expected to trigger sharp price movement.
Nifty in the red, tad below 22,500. Sensex above 74,100. All eyes on banking, housing and other rate sensitive stocks. The Bank Nifty clocked sharp gains in trade on April 4.
Experts believe that the residential housing sector is likely to see the impact of RBI rate action. The demand for residential real estate has seen significant momentum in 2024. While the expectation is that there won’t be any change today, a rate cut later in the year is not ruled out – “The long-term benefits of owning a home have led to sustainable growth in the segment and we see this up-cycle continuing in the near future. An increase in earning potential, end user-driven demand, a need for a better standard of living and the growing base of aspirational consumers and their lifestyle changes has led to substantial demand and growth in the sector. There is also a noticeable shift in the intent and aspirations of Indian homebuyers. With economic growth, the premium housing segment too continues to witness higher demand. Hence, a status quo would be preferred to bolster overall market confidence. However, we believe that a future repo rate cut would serve as a big boost to homebuyer sentiment and enable better affordability, which is an extremely sensitive factor in the housing market. We will continue to see a multi-fold growth in real estate investments since the real estate market is less volatile than other investment markets and delivers higher returns.”
Ramani Sastri, Chairman and MD, Sterling Developers
“The MPC is unlikely to act on policy rates on April 5th. Even though rate cuts can be expected this year, the time is not yet conducive for a rate cut. The growth momentum in the economy is strong and FY24 is likely to register GDP growth of 7.6 per cent, much ahead of the initial estimates. It is possible for India to achieve a growth rate of 7per cent in FY25. So, a rate cut is not warranted now.
The April 5th policy announcement is unlikely to impact the market, given the current market mood and resilience. The market is presently influenced by retail investor enthusiasm, the sustained flows into the market via mutual funds and fundamental support from good GDP growth and decent corporate earnings.”
– Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services
“In view of the evolving growth-inflation dynamics and the need to provide an impetus to the process of economic growth, we do not expect any change in the key policy rates and the status quo to be maintained. The policy rate cuts may happen in a gradual and calibrated manner from June 2024 onwards because of the downward trending inflation trajectory and the tradeoff between growth and inflation. There is a distinct possibility of 75 basis points cut in the policy rate in FY 25. Accordingly, going forward in this overarching macroeconomic setting, the policy stance may change to neutral in the April 2024 policy. Our sense is that the GDP is likely to be in the range of 6.8- 7.2 per cent though the projection for FY24 is 7.6 per cent.”
– Dr Manoranjan Sharma, Chief Economist, Infomerics Ratings
The US Federal Reserve kept the policy rate unchanged in the range of 5.25 per cent to 5.5 per cent. The US policymakers reaffirmed that the rate cuts could be seen three times this year. Despite recent inflation data coming in hotter than expected, the numbers “haven’t really changed the overall story, which is that of inflation moving down gradually, on a somewhat bumpy road,” said US Fed Chair Jerome Powell in a press conference.
In March, the Bank of England’s rate-setters voted 8-1 to keep borrowing costs at their 16-year high of 5.25 per cent, as the two officials who had previously called for higher rates changed their stance. The bank’s rate-setting Monetary Policy Committee acknowledged that inflation has been trending lower and could fall below the 2 per cent target in the second quarter of the year.
Earlier in March, Governor Kazuo Ueda from the Bank of Japan ended negative interest rates, and increased its key interest rate for the first time in 17 years from -0.1 per cent to a range of 0- 0.1 per cent. In a 7-2 majority vote, Japan’s central bank decided to increase short-term interest rates to 0-0.1 per cent.
According to a poll of 13 economists by Financial Express, the MPC is unlikely to spring any positive surprises both on interest rates or policy stance. Nearly 50 per cent of the economists expect the central bank to cut rates from the third quarter of the current fiscal while 25 per cent expect rate cuts from the second quarter. Most economists expect the central bank to retain its policy stance of ‘withdrawal of accommodation’ as any change in stance could send a signal of a rate cut, sooner than later and lead to unnecessary exuberance in the market.
India’s services activity recorded a strong growth in March. HSBC India Services PMI, compiled by S&P Global, jumped 61.2 as against 60.6 in February. This pointed to one of the strongest growth rates seen in over 13-and-a-half years.
“We expect the RBI to take comfort from declining core inflation, slightly soften its hawkish forward guidance, but remain cautious given upside risks to food inflation from weather shocks, and repricing of the Fed funds rate easing path,” said a Goldman Sachs report.
Prashanth Tapse, Senior VP (Research), Mehta Equities believes that markets may remain sideways in early trade ahead of Policy announcement, “There could be sideways movement ahead of the RBI announcement on monetary policy and banking stocks are likely to be in the spotlight. While interest rates are likely to remain unchanged in view of stubborn inflation, the street will be eyeing RBI Governor Shaktikanta Das commentary.”
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“The RBI is likely to continue with a rate pause at its first MPC meeting for FY25. Even though core and the wholesale inflation has significantly eased but the volatility in food prices continue to impinge consumer sentiment. Thus, keeping the headline inflation above the RBI target level of 4 per cent. The economic growth as well has continued to remain strong as witnessed in the above expectation GDP growth during Q3 FY24. Strong growth would continue to provide adequate support for the RBI to keep policy rates unchanged for the next few months. Stable rates will continue to support the housing market which has continued to remain upbeat. India’s housing market is currently witnessing an upcycle. Consumers have already factored in elevated interest rates and are still actively engaging in home purchases. However, the affordable housing segment is experiencing sluggish residential sales; a well-timed rate cut could be supportive of this segment.”
– Shishir Baijal, Chairman and Managing Director, Knight Frank India
“As the RBI is anticipated to maintain a cautious and potentially assertive stance, the impact extends beyond home and personal loans to various sectors like real estate and vehicle loans. With interest rates expected to remain unchanged until at least the first quarter of the financial year, stability prevails in the lending landscape, offering assurance to borrowers. Stable interest rates provide a conducive environment for real estate investment and development, sustaining demand and growth in the housing sector. Similarly, in vehicle loans, unchanged rates ensure stability and affordability for consumers, supporting demand and growth in the automotive industry.”
– Kaushik Mehta, Founder & CEO, Ruloans Distribution Services
“The industry overall wants policy stability and predictability above all else and a consistent maintenance of the repo rate will indicate that the RBI is content with the existing level of interest rates. This climate will bring in a greater amount of investment into the market and liquidity will improve, thus creating greater confidence in investors. The continuation in repo rates will also signify that depositors can continue to benefit from high-interest rates on deposits. Going ahead, we remain optimistic that the RBI will contemplate rate cuts and build a shallow rate cut cycle from June onwards to support lower interest rates and credit demand. Overall, we believe that investor sentiment will continue to remain bullish, supported by the market’s persistent strength.”
– Swati Saxena, Founder & CEO, 4 Thoughts Finance
“We think the RBI will likely maintain the repo rate at 6.5 percent. If this goes as anticipated, it would reinforce stability in the financial markets. This decision aligns with market expectations and reflects the RBI’s commitment to managing inflation and supporting economic growth. Consequently, we anticipate it could sustain positive market sentiment, bolstering investor confidence in the domestic economy. However, any unexpected deviation from this anticipated decision could introduce uncertainty and potentially lead to fluctuations in market dynamics, influencing investment strategies in the short term.”
– Suman Bannerjee, CIO, Hedonova
RBI will announce its decision on interest rates at 10 am on April 5. The expectation on the street is that the RBI may maintain status quo and is unlikely to change rates in the first half of 2024. The Monetary Policy Committee invariably meets for 3 days before announcing its decision at the end of the 3-day period. The next RBI MPC meeting is scheduled on June 5. The MPC is required to meet at least four times in a year.
“Not much has changed since the last MPC meeting in February, with the RBI overseeing an economy enjoying high growth and falling core inflation, amid stable macro stability parameters. Against this backdrop, we expect the MPC to keep the repo rate on hold at 6.5%, and maintain the monetary policy stance at a “withdrawal of accommodation”. The RBI has dialled back its hawkishness on liquidity management since the February meeting, allowing weighted average call rates to drift lower.”
– Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays
“There shall be a status quo on rates and stance in the upcoming April 2024 MPC meeting. ICRA believes that the policy stance is unlikely to be changed before the Aug 2024 MPC review, until there is visibility on the monsoon turnout as well as on the sustenance of the growth momentum and the US Fed’s rate decisions. Consequently, the earliest rate cut is only likely in the Oct 2024 meeting, unless growth posits a negative surprise in the intervening quarters, amid a shallow rate cut cycle limited to 50 bps at best.”
– Aditi Nayar, Chief Economist, Head – Research & Outreach, ICRA Ltd
One of the key monitorable in today’s RBI Policy statement is the Central Bank’s statement on inflation.
While the core inflation fell significantly to 3.34% in February from 3.59% in January, the headline CPI has remained unchanged in February at 5.09% per cent (vs 5.1 per cent in Jan 2024).
According to ICICI Securities, the RBI monetary policy committee may as a result keep interest rates unchanged and the first rate cut in the current cycle is unlikely before June 2024.
Core inflation eased to 3.34% but headline inflation too high at 5.09%, rate cut unlikely before June 2024, says ICICI Securities
Tanvee Gupta Jain, Economist at UBS India had indicated that there doesn’t seem to be any urgency to cut rates. She pointed out that the possibility of a rate cut emerges only in the later half of FY25, “We expect the shift in policy stance to “neutral” to likely happen in the June policy.”
RBI Monetary Policy Committee Meet: Check date, time and what to expect
RBI is expected to keep Policy rates unchanged at 6.50 per cent. When it met in February, the RBI MPC had decided to remain focused on withdrawal of accommodation. This stance was primarily adopted to rein in inflation and ensure that it aligns to the Central Bank’s target.
RBI Monetary Policy Committee Meet: Check date, time and what to expect
April 3-5, 2024
June 5-7, 2024
August 6-8, 2024
October 7-9, 2024
December 4-6, 2024
February 5-7, 2025
In the last quarter of FY23, on February 8, the RBI had increased the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.50 per cent.
The MPC had met in April before that to assess the macroeconomic situation and decided not to hike the country’s repo rate, keeping the key lending rate at 6.5 per cent unanimously. The RBI MPC, with a 5:1 majority, maintained the withdrawal of accommodation stance, RBI Governor Shaktikanta Das had said. The RBI had also stated the real GDP growth projection for FY24 was at 6.5 per cent. However, fears of sustained core inflation remain persistent on weather-related vagaries, OPEC+’s surprise announcement and rising commodity prices.
Before August, the MPC meeting was held on June 6-8 and the Central Bank had decided unanimously to keep the policy repo rate unchanged at 6.50 per cent. The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.