Friday, June 7, 2024

RBI Monetary Policy | Post Policy View | On behalf of Bank of Baroda

Post policy view on behalf of *Shri Madan Sabnavis, Chief Economist, Bank of Baroda* on today’s RBI Monetary Policy announcement:

_The credit policy has quite expectedly maintained the status quo on both repo rate and stance. There has been a slight revision in the GDP growth forecast to 7.2% which is still lower than our forecast of 7.3-7.4% for FY25. The RBI is sanguine on the growth trajectory and while inflation is to average 4.5% for the year, there is concern on food inflation especially in the wake of the heatwave which has increased prices of horticulture products. But with growth being secure, it gives the RBI room to not commence on rate cuts at this point of time. In fact, quite appropriately the RBI has pointed out that while inflation will go below the 4% mark in Q2, it would be rising again in Q3 and Q4. Therefore it looks like that there will be continuous monitoring of the monsoon and food inflation from now on to gauge the durability of lower inflation before taking a call. Our view is that October can be the time when a rate cut can be considered but will be fully data-driven. A clarification made by the Governor on decisions being based on local conditions is significant because often markets tend to react to Fed statements as they are interpreted as having an impact on the RBI decision on repo rate._

- *Madan Sabnavis, Chief Economist, Bank of Baroda*

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