RBI’s monetary policy committee (MPC) met today for the bi-monthly policy review to gauze the macroeconomic environment and decide on the monetary policy rate and stance.
Please find attached CareEdge report on today’s RBI monetary policy outcome.
Highlights:
- In line with the expectations, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has unanimously decided to maintain the benchmark repo rate at 6.5%. Concurrently, the MPC has upheld its stance at ‘withdrawal of accommodation’ with a 5:1 majority.
- The RBI retained its GDP growth and inflation forecast for FY24 at 6.5% and 5.4% respectively.
- The governor hinted that the RBI could opt for an open market operation (OMO) sales auction of government securities to mop up any build-up of excess liquidity.
- To cool the money market rates that are trading near the MSF rates instead of repo, RBI has advised banks having surplus funds to lend them in the interbank call market rather than passively parking funds in the SDF.
- We expect the RBI to keep liquidity conditions tight while ensuring ample liquidity is available to support the credit demand.
- The likelihood of a rate cut is now expected in the second half of the next fiscal when inflation edges closer to the 4% target.
