RBI Monetary Policy Decision_Unchanged on Expected Lines

 RBI announced the monetary policy decision on expected lines

Interest Decision   

        No change 6.25% - 6.50% - 6.75% (SDF - Repo - MSF). Prof. Jayanth R. Varma voted to reduce the policy repo rate by 25 basis points. The term of External MPC members 

Policy Stance        

Withdrawal of Accommodation (the monetary policy stance hinges on the direction of policy rates). The Governor stated that the stance of monetary policy should be read in the context of incomplete transmission and inflation above 4% target. 

Liquidity management

           No measures announced. Central Bank will continue to be nimble in liquidity management and will use an appropriate mix of instruments to modulate durable and frictional liquidity. Government spending has picked up which has augmented system liquidity

Projections

 

	Policy Date	Repo Rate	Q4	Full Year	Q1	Q2	Q3	Q4	Full Year
Real Rates current			1.5	1.1	1.5	2.5	1.9	1.8	2.0
Inflation	08-Feb-24	6.5	5.0	5.4	5.0	4.0	4.6	4.7	4.5
Growth	08-Feb-24	6.5			7.2	6.8	7.0	6.9	7.0
Inflation	08-Dec-23	6.5	5.2	5.4	5.2	4.0	4.7
Growth	08-Dec-23	6.5	6.0	7.0	6.7	6.5	6.4

 

GDP projections for 2024-25 est GDP Growth likely at 7% for full year. For Q4 FY24 and Q1 FY25, the CPI inflation was revised lower by 20 bps in line with my estimates. RBI would be vigilant about supply shocks. Recurring food price shocks could de-anchor inflation expectations and risk remain from geopolitical developments. Last mile of inflation coming to target is always a challenge.

Yields on IN10s moved higher from lows of 7.048% to 7.092%