RBI Monetary Policy Live Updates: RBI MPC expected to keep repo rate unchanged at 6.5%; decision to be announced soon – Economy News

“The RBI‘s decision to maintain interest rates at 6.5% underscores the resilience of the banking & NBFC sector, supported by strong asset quality. The moderation in unsecured lending growth highlights the sector’s commitment to prudent financial practices. With projected GDP growth at 7.2% and an anticipated boost from a strong monsoon, the financial sector is poised for robust performance. The expected increase in Kharif production will significantly benefit rural economies, fostering inclusive growth. As the sector emphasizes transparency and fairness in lending, it will empower individuals and businesses across both urban and rural areas. This aligns with the vision of an aspirational India, where sustainable and inclusive economic growth becomes the norm.”

Vipul Bhowar, Director – Listed Investments, Waterfield Advisors, said, “The Reserve Bank of India‘s Monetary Policy Committee (MPC) has again chosen to keep the repo rate unchanged at 6.5% for the eighth consecutive time in its bi-monthly interest rate decision. This decision reflects the RBI‘s cautious approach to managing inflation and supporting economic growth amidst global uncertainties and domestic challenges. With the new Modi-led NDA government taking the reins, the RBI is expected to closely monitor its fiscal policies, particularly their potential impact on inflation. This proactive stance underscores the central bank’s commitment to maintaining price stability.”

“The recommendation around increased adoption of recurring payments is a very welcome move. Enabling a friction less payments experience is a critical success factor for greater adoption of mobility solution. Use of recurring payments by managing top ups and balances in mobility related solutions like fastags, NCMC, pre-paid instruments etc. will hasten the adoption of digital payments.”

Dr Manoranjan Sharma, Chief Economist, Infomerics Ratings, said, “The RBI did well to hold the rates steady and keep the stance unchanged by a majority of 4:2. The raising of the GDP growth forecast by 20 bps to 7.2 % augurs well for the Indian economy and was, therefore, cheered by the stock market. Banks have been rightly advised not to be so aggressive on credit, particularly unsecured loans because “we are closely monitoring the incoming data to ascertain if further measures are necessary”.

The Governor did well to stress “While we do consider the impact of monetary policy in advanced economies on Indian markets, our actions are primarily determined by domestic growth-inflation conditions and the outlook”. Rate cuts are unlikely before October 2024.”

“RBI’s initiative to set up a network-level intelligence platform with real-time data sharing across the digital payments ecosystem will surely help mitigate fraudulent digital payment transactions. Led by Mr. A P Hota, with his years of experience, this initiative will enhance security and further boost user confidence in digital payments.

Further, UPI Lite, a popular tool for individuals for making pin-less small payments, will now come under the e-mandate framework by way of which customers need not manually add funds once their wallets run dry. An option to automatically replenish your UPI Lite wallet will be quite beneficial to individuals.These measures will drive multi-fold growth in UPI led transactions.”

Anshul Jain, Chief Executive India & SE Asia & APAC Tenant Representation, Cushman & Wakefield, said, “At 4.8% in April, India’s consumer inflation remains comfortable but still some distance away from the mid-point of RBI’s comfort zone (2%-6%). Therefore, economists expected the central bank to maintain its stance of “withdrawal of accommodation”, and possibly delay the start of rate cut cycle by a quarter or two. Thus, repo rate has been unchanged at 6.5% today. Earlier this week, with the European Central Bank and Bank of Canada beginning to cut policy rate, we can expect that other central banks could follow suit in the near future. More optimized lending rates will provide a further boost to housing transactions, and with the projected continued focus from the government towards Infrastructure and affordable housing, such a move would very well spur demand in the segment as well.”

Devang Shah, Head of Fixed Income, Axis Mutual Fund, said, “Policy commentary is in line with our view. The RBI is comfortable with the inflation trajectory and expects it to fall in the second half of the year. Growth has been strong and the external situation remains robust. Accordingly, the RBI will be in a watchful mode and would lower interest rates based on the evolving scenario.

With policy rates remaining incrementally stable, we remain long duration across our portfolios within the respective scheme mandates. RBI could effectively use liquidity manage tools such as VRR and reverse repos to manage durable liquidity.

From a strategy perspective, the overall call is to play a falling interest rate cycle over the next 6-12 months. Accordingly, investors should continue to build and hold duration across their portfolios. In addition, investors should be patient for further rally as rate cuts have been delayed to H2FY25. With positive demand supply outlook for bonds, FPI flows via JP Morgan Indices starting June 2024 and possibility of a lower government borrowing in July, investors could use this opportunity to invest in Short to Medium term funds with tactical allocation to gilt funds.”

“The decision of the RBI MPC meeting to hold the repo at 6.5 percent for the eighth consecutive policy review is a welcome move. The unchanged key policy rate and maintaining the withdrawal of accommodation stance to tackle inflation will offer stability and predictability to the real estate sector. The unchanged lending rates offer a favorable opportunity for EMI-dependent homebuyers and prospective buyers who want to fulfill their homeownership aspirations. Moreover, this decision establishes a strong basis for long-term stability in the housing sector, which will enhance the positive outlook prevailing in the market. The real estate industry is buoyant and gives traction to India‘s journey to become the third largest economy in the future.”

“The outcome of the RBI‘s monetary policy for June’24 was broadly as per market expectations, except for the fact that the decision of the rate-setting panel was taken with a majority of 4:2. The RBI seemed to be very confident that the growth momentum of the economy will continue and has accordingly revised the real GDP growth for FY25 from earlier 7% to 7.2%.

The RBI MPC left its inflation forecast for this fiscal year unchanged at 4.5 percent, expressing its commitment to bring the inflation level back to the target of 4% on a durable basis. The RBI governor also assured and emphasised the importance of maintaining an orderly liquidity position in the financial market, and its approach will be nimble and flexible for the same. We expect the RBI to continue to focus on fine-tuning liquidity conditions through VRR/VRRR auctions in order to align the overnight rates with the repo rate. However, larger-than-expected FPI flows could see the use of durable instruments.

The MPC meeting outcome was cheered by the equity market, but the debt market didn’t react much to the MPC meeting announcement. The market would perhaps be more keen to look for the Union Budget announcement on the government’s fiscal roadmap going forward. Insurance companies with a greater focus on fixed-income portfolios in their life funds would not have been significantly impacted by this MPC decision. The equity portfolio of the insurance companies has made some positive MTM gains, though.”

“The Reserve Bank of India‘s (RBI) focus on promoting small-value digital payments is a positive move towards empowering Digital Bharat. Integrating UPI Lite with the e-mandate framework will benefit people in Tier 2-3 towns and rural regions, who frequently rely on small-value payments for daily needs. This initiative is expected to spur consumption, contributing to the growth of our country’s economy. We appreciate the RBI’s efforts, which align with the initiatives of fintech companies like ours.

Additionally, the Digital Payments Intelligence Platform initiative by the RBI will enhance the security and transparency of our financial system, reducing fraud risks and building trust among users. This initiative will boost confidence among digital payment users, making them feel more secure when transacting digitally.”

Parijat Agrawal, Head – Fixed Income at Union Mutual Fund, said, “As expected, the Monetary Policy Committee (MPC) kept the policy rate and stance unchanged, however the split of 4-2 increases the probability of rate cut by the fourth quarter of this fiscal. The policy is clearly focused on price stability to bring headline CPI inflation to 4% on a durable basis. Resilient growth, upgrade in fiscal 2025 GDP projection to 7.2%, volatile food and commodity prices, budgetary announcements would keep the MPC on wait and watch mode for further data. The system liquidity is expected to ease as the government resumes spending.”

Madhavi Arora, Lead Economist, Emkay Global Financial Services, said, “We maintain that the RBI will not precede the Fed in any policy reversal in CY24 and policy management will have to stay vigilant amid the fluidity of global narratives. Anchor rates like the RBI policy rate change will likely be a story from 1QCY25, assuming Fed cuts shift to next year. However, other factors like liquidity could keep RBI on tenterhooks on policy management.”

Sandeep Yadav, Head – Fixed Income, DSP Mutual Fund, said, “The monetary policy did not throw any surprises, evidenced from the muted market reaction. However, there were three things that came out. Unlike previous times, the rate pause was not a unanimous decision with two members calling for a rate cut. While it doesn’t mean that we expect a rate cut in next policy, it shows that RBI is gradually moving towards a rate cut regime. RBI has also clearly disassociated their rate actions from the US FED. While RBI does look at domestic compulsions before taking rate decisions, it has to also look at the collateral damage of the currency – just like any other EM central bank. This is prudent, and we believe RBI has been following it – and will probably follow it when it cuts the rates. RBI mentioned that they prefer to keep overnight rate close to repo rate. This seems at odds with the data from past year. Many times, the overnight rate has diverged from Repo, and it probably was through RBI’s intent via VRR and VRRR. Thus, by today’s statement we believe that the future course of liquidity management will change, and RBI may keep overnight rate at Repo rate.”

Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Company Ltd, said, “MPC has delivered a ‘Fairly Neutral Policy’ with a positive undertone. The MPC has been upbeat on growth and nudged the GDP forecasts higher, while yet being cognizant and cautious of achieving the last mile of disinflation. The bump up in growth numbers renders the key optimism in policy and provides the requisite comfort to Equity markets. Given the backdrop of supportive fiscal position and the global bond index inclusion, we reckon monetary policy continues to be complementary and supportive to the bond markets. While MPC refrains from giving cues on further rate actions, 4:2 voting pattern is indeed encouraging and indicative of a possible change in stance in the near future.”

“The Reserve Bank of India has decided to keep the repo rate at 6.5% during its monetary policy, which will benefit the real estate sector. We believe that India‘s growth at 8.2% in FY 2023-24 is an outcome of the initiatives made for Viksit Bharat by 2047; the growth trajectory is predicted to continue and strengthen in the future. This stability in loan rates promotes current and future real estate investments, hence improving sector growth. Therefore, we are committed to use this growth boost to meet the increasing demand for residential and commercial spaces.”

FICCI President Dr Anish Shah said, “We are encouraged by RBI’s outlook on growth in FY25, which has been revised upwards from 7 per cent to 7.2 per cent. The forecast for inflation for FY25 has been maintained at 4.5 per cent. This is positive and reflects RBI’s stellar actions in proactively addressing risks, thus keeping the economy on a strong momentum.”

Sanjay Kumar Sinha, Founder and Managing Director, Chaitanya Projects Consultancy, said, “As anticipated, the RBI continues to keep the repo rate at 6.5%. However, the infrastructure industry and the economy at large would might have expected a rate cut, considering the significant growth in India’s GDP which now stands at 8.2%, also the current macro-economic parameters are favourable and the rate has been maintained at 6.5% for over a year now. This move will foster the confidence of Infrastructure, EPC (engineering, procurement, and construction) and real estate companies, which are primarily dependent on debt. Further, it indicates a stable economic environment, which can attract more private investment into infrastructure & continued support from the government.”

“Today’s policy announcement aligns with our expectations. With the economic outlook revised upwards, we anticipate the RBI will focus on controlling inflation, aiming to bring it under the 4% target. Despite a gradual decline over the past year, consumer headline inflation has averaged 4.8% in the last three months. While core inflation has eased, food inflation remains high, affecting household expenditure. An expected above-normal monsoon should help control food prices and bring the food inflation under control. This would prompt the RBI to perhaps lower interest rates towards end of CY 2024 thereby further fuelling growth especially in the real estate sector, particularly benefitting the affordable housing segment.”

Dhawal Dalal, President & CIO-Fixed Income, Edelweiss MF, said, “The RBI MPC held policy rate steady for 5th time. However the voting changed to 4-2 with 2 MPC members voting for a rate cut. RBI upgraded FY25 GDP growth to 7.2% from 7%, which is positive. However, the RBI was concerned with sticky food inflation amid uptrend in global food prices and industrial commodity prices. Normal monsoon this year is critical for easing of food inflation. RBI also emphasized that there will not be any blind following of the Fed in terms of rate cut as they will give more weightage to local growth inflation dynamic. Overall, a prudent monetary policy in our view with potential rate cuts pushed in the 3rd quarter of FY25.”

“RBI governor retained its CPI forecast at 4.5 percent and upped its GDP growth forecast from 7 percent to 7.2 percent. RBI governor referred to higher commodity prices as risk to CPI inflation forecast. Normal monsoon is expected to bring down food inflation in the coming months. RBI MPC maintained its stance of withdrawal of accommodation and keeping rates unchanged. 2 members have voted against this resolution. Normal monsoon and fall in commodity prices in the coming months may led to change in stance in August monetary policy. Given fiscal deficit is expected to come down below 5 percent, due to RBI dividend of Rs 2.11 Lakh crores against Rs 85000 Crores expectation, long end bonds are expected to be well bid in the coming months. The ten year is expected to trade below 7 percent in the coming months.”

Puneet Pal, Head- Fixed Income, PGIM India Mutual Fund, said, “Today’s MPC meeting was on expected lines with both the policy rates and the monetary stance unchanged though this policy takes a step closer to monetary easing with two members of the MPC voting for a cut in policy rates. RBI maintained its inflation projection for FY25 at 4.50% but increased its GDP growth projection of FY25 to 7.20% from 7% earlier.”

Achala Jethmalani, Economist, RBL Bank, said, “MPC maintains a cautious pause and the commentary suggests that the MPC’s policy decisions will be determined by domestic growth-inflation dynamics while considering the impact monetary policy outcomes in the advanced economies. The RBI Governor explicitly stated in the context of ‘follow the Fed’. Given India’s growth-inflation dynamics, we expect a rate-cut to possibly come through in Q4FY25 with a change in policy stance by December 2024. The progress of SW monsoon and the July budget will be critical inputs in the August policy.”

“As expected, the Monetary Policy Committee (MPC) decided to keep the policy repo rate unchanged at 6.5 percent, focusing on the withdrawal of accommodation to anchor inflation expectations and ensure fuller policy transmission, with a firm commitment to achieving the 4 percent inflation target on a durable basis. Global and domestic growth have been resilient, with private consumption recovering and rural demand boosted by farm activities. The IMD’s forecast of an above-normal southwest monsoon is expected to enhance Kharif production, potentially improving the inflation-growth balance. The increase in the GDP projection for the FY25 by RBI from 7% to 7.2% shows the commitment towards the balanced growth with control over inflation.”