RBI MPC meeting: RBI maintains policy repo rate unchanged at 6.5%, FY25 growth projected at 7%

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The MPC decided to maintain the repo rate unchanged at 6.50% during the Apr’24 meeting. The stance also remained unchanged at ‘withdrawal of accommodation.’ The MPC stated that the policy decision was guided by its agenda of maintaining the growth-inflation tradeoff. Whilst growth prospects remain strong, price stability needs to be achieved. The Indian economy has demonstrated strong growth prospects in recent times. However, inflationary risks continue to remain on the upside marked by elevated food inflation, crude price volatility besides supply-side disruptions globally. Given the dynamics, the MPC decided to hold the key policy rate unchanged targeting the CPI at 4.0% in the near term. The stance maintained at ‘withdrawal of accommodation’ is expected to assist in better transmission of delivered rate hikes.

Looking ahead, the forthcoming MPC decisions are likely to be data-dependent. The domestic growth prospects will be dependent on the progress of the southwest monsoon, kharif, and rabi crop arrivals, improving capacity utilization and simultaneous pickup of private and government capex plans, and revival in rural and urban demand among others.

Furthermore, recovery in global growth prospects bodes well for India’s external sector demand. On the inflation front, the MPC voiced caution about climate shocks domestically and globally which could instigate food price rises. Likewise, the prevalent geopolitical tensions may disrupt global supply chains leading to commodity price spikes, especially in crude oil. Given the same, we believe the MPC may defer the interest rate cut action until Oct’24.  

The monetary policy review statement was on the expected lines when it comes to inflation and growth estimates. As long as inflation continues to trend downward, the possibility of a cut in interest rates goes up. Though RBI will take a cue from the actions of the US Federal Reserve, it may not be as aggressive. The US Federal Reserve is expected to cut rates thrice this year. We expect a 50 basis points cut in the repo rate this financial year.

The 10-year benchmark bond yield did not move much. The bond markets will take a cue from the g-sec auction. The issuance calendar for g-sec for April- September 2024 begins with the largest auction of securities worth Rs 38,000 crore. The bond market will take a cue from the outcome of the auction. Investors looking to play downward movement in long-term yields should ideally accumulate units of exchange-traded funds tracking the Nifty 8-13 yr G-Sec index.

The RBI's decision to uphold the repo rate at 6.5% is a welcome development for our industry, providing the stability crucial for our operations. This decision is poised to rein in the costs of raw materials and alleviate any potential pressures driving prices upward. With India's anticipated real GDP growth of 7% for FY25 on the horizon, we foresee a surge in consumer demand, particularly in motorcycle sales, which could directly enhance helmet sales.

Despite persistent concerns regarding inflation, the CPI inflation projected at 4.5% in FY25 indicates a manageable economic environment. We must maintain a vigilant stance, closely monitoring inflation trends, and remaining flexible in adjusting our pricing strategies as needed.

The RBI's decision to maintain the repo rate unchanged offers a sense of steadiness within the broader economic framework. This decision holds significance for consumer confidence and available financing alternatives.  In this light, we commend the central bank for its dedication to upholding a well-rounded strategy.

Within the EV sector, stable interest rates can have a favorable influence on the accessibility and financing of electric vehicles, stimulating greater consumer adoption of cleaner transportation alternatives. This corresponds with our objective of advancing sustainable mobility and mitigating carbon emissions.

While the RBI's decision to hold the repo rate is positive for consumer durables, a wait-and-watch approach might emerge. Consumers may prioritize essentials if inflation remains a concern.  However, strong 7% GDP growth is a confidence booster.

If inflation moderates and translates into higher disposable incomes, we may see a surge in demand for consumer durables. This could be further fueled by easy loan access if banks transmit the rate stability effectively.

For the past couple of years, the RBI's policy has closely mirrored that of the Federal Reserve, and this trend persists. However, in the current Monetary Policy Committee (MPC) meeting, the governor highlighted how inflation is gradually decreasing and emphasized the robust growth in India’s economic landscape.

These domestic conditions of diminishing inflation and promising growth prospects set the stage for a potential rate cut. We anticipate that in the upcoming MPC meetings, the RBI will likely announce a rate cut ranging from 25 to 50 basis points, provided the current conditions continue to improve.

Interestingly, the impact of rate increases has had minimal effect on the demand for home loans, which continues to rise. At Andromeda, we have observed approximately a 25% growth in the total disbursement of loans, including home loans, loans against property, and personal loans, during FY24.

Once again, the RBI has maintained its policy rates, aligning with expectations. However, the encouraging news is that inflation has decreased over the past couple of months, while growth prospects have improved.

Economic growth has remained robust, evidenced by the above-expected GDP growth during Q3 FY’24. Recently, the World Bank also revised India's FY25 growth projection upwards to 6.6%, with FY24 GDP estimated at 7.5%.

This strong growth trajectory is expected to sustain adequate demand, particularly in the luxury segment of the real estate market.

Stable rates are poised to support the housing market, and we anticipate a potential reduction in interest rates in the upcoming MPC meetings.

In a testament to stability, the Reserve Bank of India has maintained the repo rate at 6.5% for the 7th consecutive time in its first MPC meeting for FY2025. Against the backdrop of inflation cooling down in recent months and a projected GDP growth rate of 7% for FY2025, the decision to uphold benchmark lending rates reinforces investor confidence.

For the real estate sector, the decision offers a sense of continuity and predictability. It also provides a solid foundation for future investment and development initiatives. Developers and investors can capitalise on the conducive environment to explore new opportunities and drive innovation in the market.

Moreover, unchanged lending rates continue to present EMI-dependent buyers with a rational opportunity to fulfill their home-ownership aspirations. With the anticipation of rate cuts in the ongoing fiscal year, the momentum in the residential segment is likely to persist.

RBI has kept the repo rate unchanged at 6.5% for the 7th time in a row. This decision is in line with the current situation as inflation remains out of the target range of RBI, due to soaring food prices in the past couple of months."

Rao further added, "Stable repo rates for more than a year have brought certainty into the real estate market. However, rate cuts are expected in the second half of 2024 if the inflation falls under the upper limit of 4%, set by RBI.”

RBI governor maintained status quo on interest rates at 6.5%. It’s been more than a year now that interest rates are stable at these elevated levels. Inflation has come down significantly from their 2022 highs of 7.79%. However, the elephant of inflation still remains above their comfort level of 4%. 

With global and domestic growth being robust, there isn’t much of a chance of cutting rates any time soon. It seems like central bankers across the world have been overpromising and will under-deliver when it comes to rate cuts in 2024. 

With geo-political tensions on the rise, chances of inflation remaining elevated in 2024 look certain. The rising cost of servicing public debt in advanced and emerging economies due to high interest rates might lead to a worsening debt situation. This might eventually lead to a cut in interest rates. Central bankers might be forced to cut rates to protect the financial system rather than stimulating growth.”

The RBI’s MPC decision to leave the policy rate unchanged was very much on the expected lines. The RBI governor highlighted that healthy economic growth gives room to the Central Bank to continue its focus on containing inflation to the 4% target on a durable basis. Core inflation, including services inflation, has been moderating in the last few months. However, the main concern of the Central Bank is the persistent high food inflation and the adverse impact of that on household inflationary expectations. 

Expectations of normal monsoon in the current year bode well for food inflation. However, the continuation of geo-political rifts and supply-side risks of the same on commodity prices requires monitoring. Increased climate risks in the domestic and global economy have emerged as another big risk for food inflation in the last few years.

Going forward, the Central Bank can look at a real rate of interest of around 1-1.5%. Hence as inflation moderates to around 4.5% and as the US Fed starts cutting rates, we can expect RBI to go for a shallow rate cut of around 50 bps in two tranches starting Q3 FY25.

The decision of the RBI to keep the repo rate unchanged has reflected as a coveted demand influencer for the real estate sector. This sentiment is expected to strengthen further given the cautiously structured move that will boost the per-capita income, thus creating more headroom for the robust growth of housing sales in the coming year.

The move to keep the repo rate unchanged consecutively has been able to nurture stable and sustained economic growth and ensure inflation descends to a target of 4%. The challenge of last-mile global disinflation is an upside risk and RBI has provided a cautiously optimistic GDP forecast of 7%. Besides the disinflationary trend in domestic economics, RBI will be watchful on the prevailing upside geopolitical and trade risks in the global environment along with the outcome of monsoon, before contemplating any changes going forward.

The RBI's decision to keep the REPO rate unchanged at 6.5%, aligns with expectations and is greatly welcomed. This move towards maintaining stability in lending rates bodes well for the real estate sector, which has been consistently growing. It also provides added support to consumers, ensuring economic growth remains robust. 

Furthermore, the Governor's optimism is bolstered by the resilience in domestic macro fundamentals. With the government’s revised GDP growth projection for FY 24 at 7.6%, Manufacturing PMI hitting a 14-year high, strong Services PMI, and high FOREX reserves, sentiment is further uplifted, promising sustained long-term growth for the domestic economy.

The announcements made during the RBI Monetary Policy meeting reflect a concerted effort by the central bank to maintain stability and manage liquidity in the financial system. The acknowledgment of improved liquidity conditions and the utilization of Variable Rate Reverse Repo (VRRR) operations demonstrate the RBI's proactive approach to addressing liquidity fluctuations. While concerns over inflation persist, the overall tone of the announcements suggests a cautious optimism regarding the economy's resilience. From an industry perspective, these measures are expected to instill confidence and support growth prospects, particularly in sectors reliant on stable financial conditions. However, continued vigilance will be necessary to navigate potential challenges, such as inflationary pressures and global economic uncertainties.

From a stock market perspective, the announcements are likely to influence investor sentiment and market dynamics. The acknowledgment of surplus liquidity and the RBI's liquidity management efforts may lead to a positive reaction in the stock market, particularly among banking stocks. Any indication of accommodative monetary policy measures could further bolster investor confidence, potentially driving upward momentum in the stock market. However, concerns over inflation and global economic risks may temper market gains. Banking sectors could benefit from the RBI's focus on liquidity management, while sectors sensitive to interest rate changes, such as real estate and infrastructure, may also see some impact. Additionally, sectors reliant on domestic consumption, such as FMCG and retail, could benefit from stable financial conditions and improved consumer sentiment. Overall, the stock market's momentum post-meeting will likely be influenced by a combination of domestic economic factors and global market trends.

The Reserve Bank of India has kept the repo rate unchanged at 6.5% and projected the GDP growth for FY25 at 7% on Friday. Beating all the expectations, RBI governor Shaktikanta Das kept the growth forecast unchanged at 7%, as the Street was expecting an upward revision of growth forecasts in the backdrop of more than expected and estimated growth witnessed by the Indian economy in Q2 and Q3 of FY24.

Read full story here: RBI MPC Meeting: RBI pegged India’s real GDP growth for FY25 at 7%- Republic World

The RBI's decision to maintain the repo rate is a strategic victory for real estate developers, including those focusing on tier-2 cities. The stability it brings creates a conducive environment for investment. The acknowledgment of decreasing inflation and improved liquidity further boosts confidence.

Additionally, sustained global economic resilience and expanding domestic activity signal growth opportunities in tier 2 cities too. This decision facilitates affordable borrowing, encouraging developers to initiate projects and enables homebuyers to invest. It is a promising outlook for real estate development

The RBI's decision to maintain the repo rate underscores confidence in the nation's economic fundamentals, setting an encouraging tone for the new financial year. With GDP projected to grow at 7% in FY25, this decision bodes well for sustained growth in the real estate sector. It signifies a conducive environment for economic development and positively impacts both residential and commercial segments.

While the current interest rate remains at its highest in four years, we urge the RBI to consider our appeal in its forthcoming review meeting. The confirmation of decreasing inflation and improved liquidity fosters a favorable environment for growth, complemented by the resilience of the global economy and domestic expansion.

This facilitates affordable borrowing, incentivising developers and homebuyers alike, catalysing robust real estate market growth.

For the seventh consecutive policy review, RBI has kept its key rates unchanged at 6.5%. There was no change in stance of ‘withdrawal of accommodation’, indicating that the RBI continues to remain focused on inflation and is aligning its commitment to ensuring its descent to the target of 4%. However, the uncertainties around geopolitical risk, and volatility around food prices and crude need to be monitored as they continue to pose challenges and have upside risks to inflation that may derail the path to disinflation.

RBI Governor Shaktikanta Das lays out 5 key points regarding Indian economy:

1. Inflation is moderating and GDP growth is robust.
2. MPC remains focussed on aligning inflation to target on a durable basis.
3. The financial sector continues to be stable.
4. The external sector also continues to be resilient.
5. RBI to continue to focus on preserving financial stability, promoting a financial sector and payments system that is robust, resilient and future-ready.

"Based on an announcement in the Union Budget for FY 2022-23, the Government of India issued Sovereign Green Bonds (SGrBs) in January 2023. SGrBs were also issued as part of the Government borrowing calendar in FY 2023-24. At present, foreign portfolio investors (FPIs) registered with SEBI are permitted to invest in SGrBs under the different routes available for investment by FPIs in government securities.

With a view to facilitating wider non-resident participation in SGrBs, it has been decided to permit eligible foreign investors in the International Financial Services Centre (IFSC) to also invest in such bonds. A scheme for investment and trading in SGrBs by eligible foreign investors in IFSC is being notified separately in consultation with the Government and the IFSC Authority," according to the RBI's statement.

The Reserve Bank of India Governor, Shaktikanta Das, today said that the central bank is proposing the facilitation of cash deposit facility through Unified Payments Interface (UPI). The RBI Governor said that the operational instructions regarding the same will be issued shortly.

“Cash Deposit Machines (CDMs) deployed by banks enhance customer convenience while reducing cash-handling load on bank branches. The facility of cash deposit is presently available only through use of debit cards. Given the popularity and acceptance of UPI, as also the benefits seen from the availability of UPI for card-less cash withdrawal at ATMs, it is now proposed to facilitate cash deposit facility through use of UPI. Operational instructions will be issued shortly,” said Das.

Benchmark indices continue to trade flat after RBI's decision to keep the policy repo rate unchanged at 6.5 per cent. As of 10:30 am, NSE Nifty 50 was trading 0.13 per cent lower at 22,484.35 while BSE Sensex was trading 0.050 per cent lower at 74,190.56.

"Two years ago, when CPI inflation peaked at 7.8% in April 2022, the elephant in the room was inflation. The elephant has now gone out for a walk and appears to be returning to the forest. We'd like the elephant to return to the forest and remain there on a durable basis. The CPI inflation must continue to moderate and align with the target on a durable basis. Till this is achieved, our task remains unfinished," said RBI Governor Shaktikanta Das during the monetary policy committee's decision announcement.

Reserve Bank of India Governor Shaktikanta Das said that the Consumer Price Index (CPI)-based inflation target for FY 25 stands at 4.5%. The RBI Governor also said that the growth forecast for FY 25 stands at 7%.

"Domestic economic activity continues to expand at an accelerated pace, supported by fixed investment and improving global environment. Second advanced estimate placed real GDP growth at 7.6% for 2023-24, the third successive year of 7% or higher growth", said RBI Governor Shaktikanta Das.

After a detailed assessment, the RBI MPC decided by a majority of 5-1 to keep policy unchanged at 6.5%. Standing deposit facility remains at 6.25% and marginal standing facility remains at 6.75%", says RBI Governor Shaktikanta Das.

“Compared to many other central banks, the Reserve Bank has much broader functions which is vital for ensuring macro financial stability of a modern and complex economy like India,” says RBI Governor Shaktikanta Das.

Comment by rating agency CareEdge: The overall economic outlook remains upbeat despite some challenges in specific sectors. While there has been broad-based moderation in inflation, higher food inflation keeps headline numbers elevated. However, benign core inflation will comfort RBI as strong growth has mainly remained non-inflationary. 

Nevertheless, headline inflation will moderate in the coming months, aided by a favourable base effect lasting until July 2024. The arrival of rabi harvests in the market along with expectations of a normal monsoon next year will also alleviate pressure on food prices. The RBI will thus be inclined to adopt a cautious approach, preferring to assess the evolving risks associated with food inflation before making any changes in its decisions. As guided by the March monetary policy bulletin, monetary policy will remain in "risk-minimisation mode" to align inflation towards the target while supporting growth. 

Given that the RBI Governor has been highlighting the aim of getting inflation to 4 per cent on a durable basis, the policy rates are likely to be kept on hold in the upcoming policy meeting, with no change in stance. Liquidity conditions continue to remain tight but have eased compared to the start of this calendar year.

The RBI will continue managing liquidity to support money market conditions. Lower budgeted gross borrowing figures, coupled with passive inflows resulting from India's inclusion in global bond indices, are expected to keep the cost of borrowing low in FY25. We expect 10y-year G-sec yield to range between 6.5-6.6% by end-FY25.

Going ahead, we anticipate that the MPC will contemplate rate cuts in the second half of FY25 as headline inflation approaches the 4% threshold. By that time, the RBI will likely have gained further clarity on the risks associated with food inflation and the policy outlook of the US Fed.

We have long maintained that the RBI policy has been somewhat pegged to the Fed, specifically over the last two years, even as it formally targeted inflation. This seems fair, as external dynamics have been fluid, implying that the policy prerogative needs to be flexible for ensuring financial stability. 

The policy narrative has been explicitly domestic, but swift policy turns/pivots in the last two years have been purely influenced by the global cause (recall a few key pivots: April'22 - stance change followed by start of the rate hiking cycle; April'23 - surprise pause; Oct'23 - OMO sales communication).

This suggests that, when needed, the aim of financial stability may even precede inflation management. We understand that shifting debates on global narratives require the RBI to be flexible as well.

Indian blue-chip indexes traded flat at the open on Friday, ahead of the Reserve Bank of India's (RBI) monetary policy decision, where the central bank is expected to maintain its key interest rate for a seventh straight meeting.

The NSE Nifty 50 index was down 0.13 per cent at 22,486.40, while the BSE Sensex added 0.08 per cent to 74,287.02, as of 9:15 am.

Governor meets Finance Minster: Reserve Bank Governor Shaktikanta Das met with Finance Minister Nirmala Sitharaman on March 20 ahead of the central bank's interest rate-setting panel meeting. Sitharaman also held discussions with Sebi Chairperson Madhabi Puri Buch at her North Block office, as confirmed by a statement from Sitharaman's Office on X. These deliberations come amidst industry advocacy for a potential interest rate reduction, coupled with notable fluctuations in the stock markets.

The RBI has maintained the benchmark interest rate, or repo rate, at 6.5 per cent since February 2023.

Read full story: RBI Governor, SBI Chiar meets Nirmala Sitharaman ahead of MPC panel meeting - Republic World

The ongoing monetary policy committee (MPC) meeting of the Reserve Bank of India (RBI) marks the first meeting of this fiscal year. The meeting is set against a backdrop of stronger-than-expected economic performance despite pressures in specific segments of the economy. Robust economic performance is highlighted by the fact that FY24 growth is now seen at 7.6 per cent, as per the advanced estimates of MOSPI, led by strong growth in the investment demand. Gross Fixed Capital Formation (GFCF), which is a proxy for investment growth, is projected to expand by a healthy rate of 10.2 per cent in FY24. 

Read full story here: Will RBI keep the rates steady in the first MPC of FY25?- Republic World

Indian blue-chip indexes, trading at record highs, are set to open flat on Friday, ahead of the Reserve Bank of India's (RBI) monetary policy decision, where the central bank is expected to maintain its key interest rate for a seventh straight meeting.

Read full story here: Nifty, Sensex set for flat open ahead of RBI rate decision- Republic World