RBI Monetary Policy | 9th October 2024
Reaction Quote | RBI Monetary Policy | Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank
“RBI’s decision to hold rates while changing the stance to neutral is completely in line with our expectations. The tone of the Governor remains fairly balanced keeping further decisions data dependent. We continue to expect the onset of rate easing from December with a 25bps cut but the scale of easing in this cycle is expected to be shallow with limited scope for back-to-back easing in each policy.”
- Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank
Reaction Quote | RBI Monetary Policy |Anu Aggarwal, Head – Corporate Banking, Kotak Mahindra Bank
“The RBI’s shift to a ‘neutral’ stance marks a pivotal step in its approach, providing more flexibility in navigating the evolving economic conditions. With food inflation easing and the monsoon being favorable, this change signals optimism for India’s inflation outlook. Globally, trends such as the US Federal Reserve’s rate cut and easing monetary policies further support this shift. By adopting a more neutral position, the RBI is positioning itself to respond dynamically to future developments, while continuing to foster economic stability and long-term business confidence.”
- Anu Aggarwal, Head of Corporate Banking, Kotak Mahindra Bank
Reaction Quote | RBI Monetary Policy | Manish Kothari, Head – Commercial Banking, Kotak Mahindra Bank Limited
““RBI Governor “walks the talk” on managing inflation as their key priority, yet again! Hence, the policy rate was kept unchanged, although the stance was changed to Neutral. His oft repeated statement was, “unambiguously focused on durable alignment of inflation with target, while supporting growth”; signaling clearly that any future rate cut would depend upon the inflation trajectory trending downwards. The Governor’s comfort for the change in stance seemingly stemmed from India’s growth story remaining intact; with private investment & consumption as well as Govt capex expected to pick up in H2, a stronger kharif output & rabi sowing due to a good monsoon lending to a pick-up in rural demand, and a resilient CAD & forex position keeping the INR steady. Hence, he retained the current year GDP growth target at 7.2%, while mentioning that adverse weather conditions and/or accentuated geopolitical conflicts could lead to downside risks for the economy.”
- Manish Kothari, Head – Commercial Banking, Kotak Mahindra Bank Limited.
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Monetary Policy Update by Saurabh Mishra, CEO – Investment Landscape
Current Monetary Policy Stance:
In the recent monetary policy meeting, the RBI decided to maintain the repo rate at 6.5%, shifting its stance from ‘withdrawal of accommodation’ to ‘neutral.’ This decision reflects the RBI’s aim to balance inflation control with the need for economic growth amidst a complex global economic environment.
Economic Context:
• Global Influences: The US Federal Reserve’s recent aggressive rate cut of 50 basis points and similar moves by other central banks highlight a trend of easing monetary policy in response to economic challenges.
• Domestic Growth and Inflation: The RBI has retained its GDP growth forecast for FY25 at 7.2% and the CPI inflation forecast at 4.5%. This indicates a focus on maintaining stable growth while managing inflationary pressures.
Views on the Monetary Policy:
1. Prudence in Decision-Making: The RBI’s decision to hold the repo rate steady demonstrates a prudent approach in navigating economic uncertainties. By opting for a neutral stance, the RBI signals its commitment to both growth and stability, which is crucial in the current climate.
2. Focus on Inflation Control: Maintaining a focus on inflation is essential for sustaining consumer confidence and economic health. With inflation expectations anchored, the RBI can provide a stable environment for businesses and consumers.
3. Growth Potential: The retention of the growth forecast at 7.2% reflects a positive outlook for the Indian economy. It is essential to monitor global economic developments, as they can impact domestic growth and inflation dynamics.
4. Currency Stability: The Indian rupee’s stability amidst global volatility is a testament to strong macroeconomic fundamentals. This is vital for attracting foreign investment and supporting long-term economic growth.
5. Future Considerations: Moving forward, the RBI may need to remain flexible in its policy approach, considering evolving economic indicators and external factors. Continuous monitoring of inflation trends and growth metrics will be critical to adapting the monetary policy effectively.
Conclusion:
The RBI’s current monetary policy stance illustrates a balanced approach aimed at fostering growth while maintaining inflation within target limits. As the global economic landscape shifts, the RBI’s decisions will play a crucial role in steering the Indian economy towards sustainable growth and stability. Continued vigilance and adaptability will be key to navigating potential challenges ahead.
- Saurabh Mishra, CEO & Founder – Investment Landscape
