30/09/2024
Repo Rate: RBI kept the Repo Rate unchanged and retained the stance on withdrawal of Accommodation
- Repo Rate: 6.50% (6.50% in August 2023)
- Reverse Repo Rate: 3.35% (3.35% in August 2023)
- Bank Rate: 6.75% (6.75% in August 2023)
- MSF: 6.75% (6.75% in August 2023)
- Inflation: RBI kept it’s FY24 inflation forecast unchanged at 5.4%. It revised the quarterly inflation projection slightly raising Q2 FY24 forecasts by 20 bp owing to larger than expected spike in food prices in the quarter while food prices pressure could last through Q3 RBI revising down its Q3 forecast by 10bp.
- Growth: The MPC statement was optimistic on growth, highlighting the resilience shown by the economy owing to robust domestic demand with continuous momentum in industrial production, strong service consumption, urban demand holding up, rural demand showing up signs of recovery. The central bank maintained its GDP growth forecast for FY23-24 at 6.5%
- Liquidty: The Governor remained hawkish on the liquidity stance as well, highlighting that bank may have to consider OMO sales in the future as liquidity conditions ease with release of ICRR funds and higher government spending which will be somewhat offset by a pickup in festival time spending. The announcement of potential OMO sales led to an increase in 10yr yeild.
We continue to expect the RBI to remain on hold for rest of FY23-24, with a window for rate cuts only opening from Q2 FY24-25. Moreover with regards to growth we maintain our stance of 6.8% growth in FY23-24 followed by 7.2% growth in FY24-25.