The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) convened for a three-day meeting on Tuesday, with most analysts projecting no change in the benchmark interest rate. On August 8, the committee's decision will be made public.
The chief investment officer of debt at Kotak Mahindra AMC, Deepak Agrawal, predicts that the repo rate will remain at 6.50%. Core inflation is still stable at 3.10% even though recent increases in food prices have caused inflation to spike to 5.08%. Agrawal pointed out that favourable monsoon conditions, recent drops in crude oil prices, and improvements in the fiscal deficit could all help to restrain inflation in the upcoming months.
Global economic trends point to a more dovish global stance, including weaker U.S. data and rate cuts by major central banks. Agrawal anticipates that the RBI will keep its current rate in place but might adopt a more neutral approach to policy. Barclays' Shreya Sodhani, a regional economist, believes the MPC will stay on hold while it monitors the inflation outlook for the second half of FY24–25.
Sodhani said, "We maintain our forecast of an RBI rate cut in December, but note the risk of a delay if inflation does not progress in line with the RBI’s expectations. The timing of a rate cut by the RBI will also be influenced in the event of a significant global economic downturn weighing on domestic growth."
Due to robust economic growth, Anil Rego, the founder and fund manager of Right Horizons, anticipates no rate increase. Until inflation drops below the 4% target or the U.S. Federal Reserve lowers interest rates, he anticipates the RBI maintaining rates at current levels.
Amit Goel, co-founder and chief global strategist at Pace 360, thinks that given low core inflation and excess liquidity, the RBI may take a neutral rather than a hawkish stance.
Goel said, “In a recent interview, RBI Governor Shaktikanta Das outlined a cautious approach to aligning inflation with the target. We believe the central bank will only begin easing once the drop in inflation is realized. This will have a positive impact on equities. It is advisable to book profits and gradually increase allocations in bonds and gold. We believe that, going forward, both bonds and gold will offer better performance opportunities compared to equities."
Because of ongoing inflationary risks and uncertainty surrounding the state of the global economy, Shishir Baijal, Chairman and Managing Director of Knight Frank India, concurs that the RBI will keep rates unchanged. He underlined that the Indian real estate market benefits from a stable rate environment.
Given the current inflation-target gap, Governor Das previously stated that any change in the interest rate stance would be premature.
