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.
“The RBI MPC voted 5-1 to hold the repo rate at 6.50% and to maintain the policy stance as "withdrawal of accommodation" to ensure that "inflation progressively aligns to the target, while supporting growth". Robust growth momentum means the MPC sees no urgency to cut rates; the Governor mentioned that the outlook for growth allows space for the bank to "unwaveringly focus on price stability". He cautioned against complacency on inflation, especially when the risk of supply side disruptions remain.
We maintain our forecast that the RBI will begin its rate-cut cycle in Q2 FY23-24, which is when the bank forecasts inflation will fall below 4%. We think the policy stance will also likely be kept unchanged until that time, as the RBI will likely be wary of signalling a pivot through an earlier move to neutrality, in line with its stated preference of not providing forward guidance in times of uncertainty.”
“The RBI's decision to keep the REPO rate unchanged at 6.5%, aligns with expectations and is greatly welcomed. This move towards maintaining stability in lending rates bodes well for the real estate sector, which has been consistently growing. It also provides added support to consumers, ensuring economic growth remains robust. Furthermore, the Governor's optimism is bolstered by the resilience in domestic macro fundamentals. With the government’s revised GDP growth projection for FY 24 at 7.6%, Manufacturing PMI hitting a 14-year high, strong Services PMI, and high FOREX reserves, sentiment is further uplifted, promising sustained long-term growth for the domestic economy.”
"RBI’s decision to keep policy rates unchanged for the seventh consecutive time is a much-expected move. With headline inflation easing to 5.1% for January and February 2024 as compared to December 2023, and the focus on FY25 CPI inflation forecast placed at 4.5%, we foresee a cautious but robust economic growth that will enable higher disposable income in the hands of the domestic buyer class. Having said that, multiple cues from both international and national aspects like the geopolitical situation, US Fed trends, and trade risk will further shape the RBI decision, that can also influence gold exports.”
“As expected, RBI has maintained its pause on policy rates and kept intact its withdrawal of accommodation. Alongside the growth and inflation estimates for FY25 have also been maintained at 7.0% and 4.5% respectively. Notably, this is despite stronger than expected advance estimates of GDP of 7.6% for FY24. The voting stance also remains unchanged at 5-1. Notably, RBI has a view that domestic growth momentum led by rural recovery, private capex and government investment will remain strong into the year, and inflation is also expected to remain moderate. However the key headline risk is coming from rising geo-politics which is also getting evidenced in rising crude prices. The impact on inflation from the above two factors warrant a watch and staying cautious on the policy. On liquidity, RBI is likely to continue with the current tools of VRR and VRRR to manage deficit and surplus in the system. Ahead of the bond inclusion, RBI is not doing anything different to change the dynamics of policy actions or liquidity management. In summary, RBI is not lowering the guard while inflation aligns to the target. Status quo for now!”
- Anitha Rangan, Economist, Equirus
“The overarching macroeconomic setting is characterized by softening of headline inflation from 5.7 per cent in December 2023 to 5.1 per cent during January and February 2024 with core inflation declining steadily over the past three quarters (fuel component of the CPI being deflationary for two consecutive quarters but higher food inflation pressures in February) juxtaposed with real GDP growth at 7.6 per cent for FY 24 and real GDP growth for FY 25 is seen at 7 percent.
Going forward, 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 trade-off between growth and inflation. There is a distinct possibility of 75 basis points cut in the policy rate in FY 25.”
- Dr Manoranjan Sharma, Chief Economist at Infomerics Ratings
“The RBI Governor is playing like Brian Lara at Antigua Ground. After scoring 375 runs, the highest score in a test match, he scored 400 runs to better that. The RBI has achieved the objective of stability, trust and growth. Growth is higher than market expectations. Market is trusting the RBI to lower the Inflation to mid-point. Financial markets in stable conditions. The markets expects the RBI to maintain the motto of stability, trust and growth in the markets."
- Nilesh Shah, MD, Kotak Mahindra AMC
“RBI’s maintenance of status quo on the repo rate and the policy stance marked by ‘withdrawal of accommodation’ is a prudent decision amidst increasing geopolitical uncertainties and any adverse climate impact. Room for monetary policy easing could emerge in the coming months if inflation glides lower along the projected trajectory. Additionally, the flexibility allowed to SFBs to manage interest rate risk through use of permissible interest rate derivatives is a welcome step.”
Dharmakirti Joshi, Chief Economist, CRISIL
"As expected, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) kept the repo rate unchanged at 6.50%. It has been 14 months since the rate was last raised. That said, over the last one year, the central bank did tighten monetary conditions by reducing liquidity.
With inflation trends mixed, the MPC is preferring to wait for clearer signs of easing towards its 4% target. Strong growth momentum in the economy has provided it space to do so.
While food inflation was above 8% in the most recent reading, non-food was way lower at 2.9%. Core inflation at 3.4% was well below RBI’s 4% target.
Monsoon this year could be better than last year, with the US National Oceanic and Atmospheric Administration (NOAA) expecting La Niña conditions to develop by June-August, which augurs well for the southwest monsoon. Last year El Niño and weak rains curtailed food output. This would be positive for rural demand as well as food inflation in the current fiscal.
The picture on monsoon will be clearer by the next MPC review meeting in June.
Easing food inflation and benign non-food inflation should bring headline inflation closer to the RBI’s target of 4%. That said, any weather disruptions and sustained uptick in crude oil prices will remain monitorable.
The transmission impact of rate hikes since May 2022 and regulatory measures on risky lending are still playing out. We expect growth and inflation in fiscal 2025 at 6.8% and 4.5%, respectively.
Overall, the macro environment is likely to turn favourable for a rate cut by mid-2024 in our base case, lest oil prices and monsoons play a spoilsport."
“As widely expected, MPC continues to persist with its no change in stance and rates and clearly no negative surprise is indeed a positive from markets standpoint, as it underscores policy stability. MPC continues to be nimble and has deftly balanced the macro backdrop of robust growth and inflation above target of 4%. Although considerable progress has been made in bringing the inflation below its peak levels. Further, MPC has been cognizant of robust foreign flows along with ongoing geopolitical tensions and risks emanating from higher crude prices and has thus refrained from giving any premature policy pivots. MPC continues to reemphasize the achievement of inflation target on a durable basis and distinctly indicates rate change in the near term is unlikely. Overall, a well-anchored policy exercising caution and being data dependent amid the uncertainty in global markets coupled with key domestic events on the anvil.”
“RBI MPC maintains status quo on the repo rate at 6.5% in line with expectation. India’s central bank is in sync with the world central banks such as the US Fed, Bank of England, ECB and PBOC in keeping its interest rates unchanged. There were no new surprises from the MPC as inflation continues to get closer to target levels and our economy continues to grow at 7% or higher for the 3rd successive year. India stands strong like a rock amongst other economies and our expectation is that interest rates will start pivoting sometime around the last quarter of this calendar year.”
“As expected MPC kept the policy rate and stance unchanged. The softening of core inflation gives sufficient room to MPC, however volatile food inflation and recent uptick in crude and other commodity prices is to be watched and MPC kept the full year's projection at 4.5%. The strong momentum in growth also gave comfort to MPC to align the CPI on a durable basis to 4%. We expect rate cuts in the 3rd quarter of FY25, possibly after the US FOMC starts rate cut cycle. RBI is expected to keep liquidity neutral so that further transmission of higher rates can continue. There is a possibility of modification of LCR framework going forward which may augur well for bonds.”
- Parijat Agrawal, Head – Fixed Income, Union Mutual Fund
“Monetary policy was broadly on expected lines. MPC kept its stance same as withdrawal from accommodation. RBI highlighted that strong growth momentum is giving policy space to focus currently on inflation. RBI remained cautious against premature easing as RBI remained watchful on inflation due to volatile food inflation and higher crude prices but took comfort from benign core inflation trends. This is a balanced outcome for the equity market. Review of LCR (Liquidity Coverage Ratio) framework for banks to have strong liquidity management would only strengthen the system. We remain positive on equity markets in the near-to-medium term with real estate, banks, consumer and engineering/capital goods as preferred sectors.”
Gaura Sen Gupta- Economist, IDFC First Bank
"Today’s RBI policy was along expected lines with status quo on rates and policy stance. Robust growth conditions provide policy space to remain focused on inflation and ensure moderation to 4%-target on a durable basis. The overall tone of the policy remains cautious on food inflation risks, with the Governor highlighting that successive price shocks could un-anchor inflation expectations and disrupt disinflation process.
The next policy step is likely to be easing with inflation expected to move towards the target rate in FY25. However, RBI is unlikely to be in a hurry to cut policy rates with growth showing no adverse impact of current policy rates. Indeed, in the past India has been able to sustain 2% real rates and strong growth conditions. This provides policy space to wait for clarity on food inflation risks and Fed policy. By August 2024, nearly half of the monsoon season is over, providing clarity on food inflation risks. The Fed policy is proving more uncertain with last few inflation prints on the higher side.
The recent rise in commodity prices adds further complication to global inflation outlook, which could force central banks globally to remain on a prolonged pause. Domestically, we see limited risk to India’s CPI inflation from higher fuel prices assuming retail petrol and diesel prices remain steady.
Against this backdrop, we expect RBI rate cut cycle to start from August 2024, at the earliest. This is contingent on the Fed rate cut cycle starting from June / July. In case the Fed rate cut cycle gets delayed due to adverse US inflation prints, RBI rate cut cycle could also get delayed.
As per RBI’s assessment, FY25 GDP growth is expected to be led by consumption and private capex cycle. Normal monsoon is expected to support rural demand and urban demand is expected to stay buoyant with strong growth in manufacturing and services sector.
India’s external account metrics remain strong with current account deficit expected to narrow to 0.7% of GDP in FY24 (IDFC FIRST Bank Estimate) and FY25 expected at 1.3% of GDP. We see limited upside risk from recent rise in crude oil prices."
After the RBI MPC decided to keep the repo rate unchanged at 6.50%, Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers, said that the decision underscores the central bank's vigilance over headline inflation, which remains above the MPC’s target, amidst strong growth dynamics in India. “This careful stance reflects concerns over potential inflationary pressures arising from volatile food prices, recent upticks in oil prices, and robust economic growth. While there was some anticipation of rate cuts by the end of 2024, the RBI seems inclined to adopt a wait-and-see approach before initiating a rate cut cycle,” added Sujan Hajra.
“As we expected, the MPC policy took recognition of the fluidity of global narratives, even though domestic dynamics have stayed favorable. This suggests that when needed, the aim of financial stability may even precede inflation management. We have long maintained that the RBI policy has been somewhat pegged to the Fed, specifically over the last two years, even as it formally targeted inflation. This seems fair, as external dynamics have been fluid, implying that the policy prerogative needs to be flexible for ensuring financial stability. The fluidity of global narratives and policy repricing, in conjunction with the near-term problem-of-plenty on INR/bonds, could make it arduous for the RBI to find a balance in its policy biases. Thus we maintain the RBI’s tone will slowly tiptoe to ‘Gracklish’ from the usual ‘Hawk-Dove’ signaling, implying a non-committal stance and limited definite forward guidance ahead. While bull-steepening of India bonds looks to be a popular trade, consistent repricing of Fed cuts could spill over into the RBI’s reaction function and will be cyclically noisy for bonds/FX.”
Highlighting that the last mile of inflation remains challenging, the RBI MPC decided to keep rates unchanged and maintained a “withdrawal of accommodation” stance. GDP forecast for FY 25 was retained at 7% and inflation for FY 25 projection is also unchanged at 4.5% from the Feb 2024 policy. Deepak Agrawal, CIO- Debt, Kotak Mahindra AMC says "We continue to expect a rate cut in the US and RBI is also likely to change MPC stance and cut rates in the second half of CY 2024. RBI will continue to manage liquidity such that repo rates are the operation rate."
“As was expected the RBI governor kept the repo rates steady, even though the core inflation has softened because the trends of inflation do not appear to be disinflationary entirely. Anchoring inflation expectations is one of the key objectives of inflation management and the measure taken by the governor is in the right direction.”
“Aptly and as expected, the RBI has kept the repo rates unchanged at 6.5%. The Indian economy is going strong and inflation is reined in, though it has yet to come within the threshold of RBI’s target. The decision to maintain status quo will keep the ongoing residential real estate sales momentum on course and unimpeded. Aspiring homebuyers eyeing a purchase will proceed with confidence.”
- Anuj Puri, Chairman, ANAROCK Group
“The central bank maintains the repo rate at 6.5% continuing a hawkish stance to keep inflation under check. However, with repo rates being an industry agnostic subject, we hope to see lower repo/interest rates later this year which will provide an impetus to not just real estate and housing demand but across industries – compounding sectoral and economic growth. Having grown 8.4% in Q3 of FY 2023/24, a rate cut in the future will help sustain this economic momentum or even accelerate it - and we expect to see repo rates being reduced in Q2 of the new FY in the post-election phase.”
"The monetary policy which has come on expected lines with no change in policy rates and stance is, however, very optimistic about the current financial year. Emphasising that “CPI inflation is in declining trajectory and GDP growth is buoyant” the Governor has projected CPI inflation of 4.5% and GDP growth of 7% for FY 25. This optimism augurs well for the stock market. Governor’s remark that “private capex cycle is getting broad-based and capacity utilisation is improving” is good news for the capital goods segment."
"The Reserve Bank of India has decided to keep the policy rate unchanged for the time being. The focus remains on inflation, though on a declining trajectory, there is uncertainty surrounding food prices, oil prices, and the monsoon. The last mile on disinflation remains challenging. It is important to note that the RBI is not in a hurry to cut rates, as the growth remains intact."
“The decision to pause along with no change in stance was in line with our expectation. Expectedly, the focus of the MPC remained on ensuring disinflation on a sustained basis in order to achieve their medium term inflation target of 4%. The RBI does not seem to be too worried about the liquidity situation. We expect the RBI to continue to focus on fine-tuning of liquidity conditions through VRR/VRRR auctions, in order to align the overnight rates with the repo rate. The RBI has enough space for holding repo rate steady, with its FY2025 GDP growth being quite strong at 7% in order to target the 4% inflation mark. We continue to expect a shallow rate cut cycle from Q3FY25 onwards with the stance changing to neutral in end-Q2FY25 or along with the rate action.”
“The RBI's decision to maintain the repo rate unchanged is significant as it monitors upside risks to inflation for the Indian economy. This consistent stance of RBI underscores managing price stability amidst inflationary pressures. It's positive news for future homeowners, as borrowing costs won't see an increase, making buying a home more accessible.”
"RBI’s decision to maintain the repo rate at 6.5% is on expected lines. However, a rate cut, anticipated later this year, would provide a boost to the residential sector, particularly affordable housing. Though the central bank has been showing its deep commitment to bringing the headline inflation down to around 4%, India’s CPI inflation has been stable for a considerable period, and we expect the RBI to capitalize on prevailing healthy macro-economic climate and implement a rate cut in one of the subsequent MPC meets to boost consumer spending and demand."
“As the commercial real estate sector anticipates a stable economic environment with the repo rate remaining constant at 6.5%, we welcome this consistency as it gives investors confidence and supports sustainable growth opportunities in the market. A constant repo rate is beneficial for the commercial real estate sector by providing stable borrowing costs, enhancing investor confidence, maintaining favourable financing conditions, supporting economic expansion, facilitating long-term investment planning, and mitigating interest rate risks. These factors contribute to a conducive environment for growth, development, and sustainability in the commercial real estate market. Therefore this was a good step to keep the rates constant.”
- Aankush Ahuja, Founder and CEO, FOIP
“Though, the uncertainties around geopolitical risk, volatility around food prices and crude needs to be monitored as it continues to pose challenges and have upside risks to inflation that may derail the path to disinflation.”
"In a testament to stability, the Reserve Bank of India has maintained the repo rate at 6.5% for the 7th consecutive time in its first MPC meeting for FY2025. Against the backdrop of inflation cooling down in recent months and a projected GDP growth rate of 7% for FY2025, the decision to uphold benchmark lending rates reinforces investor confidence.
For the real estate sector, the decision offers a sense of continuity and predictability. It also provides a solid foundation for future investment and development initiatives. Developers and investors can capitalize on the conducive environment to explore new opportunities and drive innovation in the market. Moreover, unchanged lending rates continue to present EMI dependent buyers a rational opportunity to fulfil their home-ownership aspirations. With anticipation of rate cuts in the ongoing fiscal year, the momentum in the residential segment is likely to persist.”
“In my view, with inflation still above the tolerable threshold and growth remaining strong, the RBI maintained the status quo on the repo rate. This prudent approach could be beneficial for home loan borrowers, as any increase in rates might have made loans more expensive. However, it will be interesting to see if the central bank shifts its focus from inflation to growth stimulation. Such a move could potentially lower home loan rates, provide relief to borrowers, and stimulate the housing market. A balance between controlling inflation and supporting growth will be key. Home loan borrowers and the real estate sector are hopeful for positive news that will make housing more affordable and boost the economy at large. On the other hand, the RBI's focus on the general economy will likely continue to prioritize inflation control while augmenting growth.”
- Anuj Sharma, COO, IMGC (India Mortgage Guarantee Corporations)
“RBI MPC has kept the status quo on the interest rates and the monetary stance in the first meeting of FY25 and for the seventh consecutive time. Not surprisingly, RBI has continued to reaffirm its commitment to disinflation and price stability without providing any guidance on the timing of the monetary policy pivot. The central bank would continue to be watchful about the increased crude oil prices and any upward risks in food inflation in the near term, given the forecast of an intense upcoming summer season. The governor highlighted the significance of keeping the “elephant in the forest” (metaphor for high inflation) for a durable period.
The growth expectations for RBI continues to be strong with the GDP growth forecast for FY25 retained at 7.0%, reaffirming the strong momentum in domestic economic activity. Our outlook on the domestic growth prospects is relatively moderate with a forecast of 6.7% for FY25, given the muted private consumption growth as compared to gross fixed capital formation. On the inflation front, RBI has retained the CPI inflation forecast at 4.5% for the current fiscal; we have pegged it higher at 4.8% since there are potential risks to food and fuel inflation.
Given the tone of the MPC statement and the expectation of strong domestic growth, we believe that there is a low likelihood of any rate cut by RBI before Oct'25.”
“As we progress towards RBI@100, the upcoming decade is going to be a transformational journey. The Reserve Bank will continue to focus on preserving financial stability and promoting a system that is robust, resilient and future-ready to support economic growth. Price stability will be a key component of this endeavour,” Shaktikanta Das said.