• Tue. Feb 27th, 2024
RBI Monetary Policy Preview: Could Central Bank Signal End of Tightening Cycle?

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) will remain on hold on June 8 and keep the policy repo rate at 6.5%, brokerage Nuwama Institutional Equities said in its latest research report. of inflation.

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) will remain on hold on June 8 and keep the policy repo rate at 6.5%, brokerage Nuwama Institutional Equities said in its latest research report. of inflation.

The second bi-monthly monetary policy for the financial year 2023-24 will be discussed at the three-day meeting of RBI’s MPC starting today, June 6. RBI Governor Shaktikanta Das will make the committee’s conclusion public on June 8.

The second bi-monthly monetary policy for the financial year 2023-24 will be discussed at the three-day meeting of RBI’s MPC starting today, June 6. RBI Governor Shaktikanta Das will make the committee’s conclusion public on June 8.

The MPC kept the repo rate at 6.5% at its first bi-monthly policy meeting for the new fiscal year 2023–24 (FY24) on April 6. Since last May, the repo rate has already been hiked by a total of 250. Basic points of trying to reduce inflation.

The MPC kept the repo rate at 6.5% at its first bi-monthly policy meeting for the new fiscal year 2023–24 (FY24) on April 6. Since last May, the repo rate has already been hiked by a total of 250. Basic points of trying to reduce inflation.

The brokerage firm noted that in contrast to the welcome real GDP growth in 4FY23, CPI inflation in April was adjusted to 5%. A combination of cues allows the RBI room to keep an eye on incoming data before changing directions. It may now shift from ‘accommodation withdrawal’ to ‘neutral’ if inflation remains moderate, the brokerage believes.

The brokerage firm noted that in contrast to the welcome real GDP growth in 4FY23, CPI inflation in April was adjusted to 5%. A combination of cues allows the RBI room to keep an eye on incoming data before changing directions. It may now shift from ‘accommodation withdrawal’ to ‘neutral’ if inflation remains moderate, the brokerage believes.

“One comforting factor for policymakers is the slowing pace of inflation. Headline CPI is now below 5%, showing an easing trend across several factors. At the same time, input price pressures have eased sharply, hinting at a more moderate CPI for core commodities. The MPC is likely to maintain its stance in the upcoming policy review. It seems, however, that policymakers will rush to reverse course,” the brokerage said in its report.

“One comforting factor for policymakers is the slowing pace of inflation. Headline CPI is now below 5%, showing an easing trend across several factors. At the same time, input price pressures have eased sharply, hinting at a more moderate CPI for core commodities. The MPC is likely to maintain its stance in the upcoming policy review. It seems, however, that policymakers will rush to reverse course,” the brokerage said in its report.

The brokerage also pointed out that real GDP growth has been stronger than expected, though nominal gross domestic product (NGDP) has rebounded to 10 percent (YoY) from 17-18 percent a few quarters ago. Consumption fell below forecasts and 10% growth in NGDP was possible only through favorable terms of trade (reducing external deficit).

The brokerage also pointed out that real GDP growth has been stronger than expected, though nominal gross domestic product (NGDP) has rebounded to 10 percent (YoY) from 17-18 percent a few quarters ago. Consumption fell below forecasts and 10% growth in NGDP was possible only through favorable terms of trade (reducing external deficit).

Real rates are rising, the global recession is worsening, and the brokerage expects the effects of the previous monetary easing to continue to be felt across the economy for the foreseeable future. Monetary policy also operates with long and unpredictable time lags. Economic policy also continues to tighten. Hence, growth concerns will increase in the coming quarters.

Real rates are rising, the global recession is worsening, and the brokerage expects the effects of the previous monetary easing to continue to be felt across the economy for the foreseeable future. Monetary policy also operates with long and unpredictable time lags. Economic policy also continues to tighten. Hence, growth concerns will increase in the coming quarters.

“Given the pulls and pushes discussed above, we expect continued pause from the MPC. However, we expect the committee to change its fiscal stance from ‘accommodative withdrawal’ to ‘neutral’, signaling the end of the tightening cycle. After all, the external deficit (CAD) and inflation are significantly has declined. That means the RBI will not reverse course anytime soon,” the brokerage said in its report.

“Given the pulls and pushes discussed above, we expect continued pause from the MPC. However, we expect the committee to change its fiscal stance from ‘accommodative withdrawal’ to ‘neutral’, signaling the end of the tightening cycle. After all, the external deficit (CAD) and inflation are significantly has declined. That means the RBI will not reverse course anytime soon,” the brokerage said in its report.

Leave a Reply

Your email address will not be published. Required fields are marked *