Repo rate unchanged as inflation fight not over: What experts make of RBI's status quo

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Thursday decided to maintain status quo and keep key interest rates unchanged for second time in a row, maintaining the benchmark policy rate at 6.5 per cent as inflation moderates.

Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) unanimously decided to keep the rate unchanged at 6.5 per cent. The rate hike cycle was paused in April after six consecutive hikes aggregating to 250 basis points since May 2022.

The MPC meeting took place against the backdrop of consumer price-based (CPI) inflation declining to an 18-month low of 4.7 per cent in April. The Reserve Bank governor recently indicated that the May print, which is scheduled to be announced on June 12, would be lower than the April numbers.

We have collated views from different experts as to what they make of June bi-monthly policy of the central bank:

Anitha Rangan, Economist, Equirus:

Overall, it appears that in the current favourable balance of growth inflation dynamics with external sector being manageable, RBI does not want to disturb the balance and using the calm as the “elbow room” to maintain pause. RBI perhaps is buying time and push the hike as far as possible.

Atul Banshal, Director-Finance, Omaxe:

We maintain our expectation that the RBI will opt for a policy rate reduction in the next review meeting, providing a much-needed impetus to various sectors, including real estate, and fostering economic growth.

Sandeep Bagla, CEO, Trust Mutual Funds:

We are not out of the woods yet. Liquidity surplus will have to be reduced as Rs 2,000 notes seep into the banking system liquidity. Quite possible that market yields rise by a few basis points as RBI waits for more economic cues amid continued global contradictory on inflation and growth fronts.

Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares and Stock Brokers:

While the continuation of the RBI's policy stance is somewhat disappointing, the central bank's cautious approach considering upside risks, such as the potential impact of El Nino on India's monsoon and the continuation of monetary tightening by the world's major central banks, appears justified and well-articulated.

Rajeev Radhakrishnan, CFA, Chief Investment Officer - Fixed Income, SBI Mutual Fund:

“A pause-restart cycle in global monetary policymaking is the risk that has come to the forefront in recent weeks. In this context, the RBI has rightly re-emphasised the requirement to continue the withdrawal of liquidity and more importantly stress on the midpoint inflation target of 4 per cent rather than take comfort from CPI falling within the target band.

Ritika Chhabra- Quant Macro Strategist – Prabhudas Lilladher PMS:

The central bank kept its stance unchanged to 'withdrawal of accommodation' as it maintains its focus on inflation, citing delay in monsoon, El nino impact and geopolitical uncertainties as upside risks to inflation. We expect FY24 inflation at 4.9 per cent slightly lower than RBI's estimate of 5.1%, as base effect turns favorable and imported inflation eases.”

Vimal Nadar, Head of Research at Colliers India:

As home loan rates are already at elevated levels of 9 per cent and above, this is a significant breather for lenders, developers & homebuyers. First-time homebuyers will be better placed to make their home-buying decision in a stable lending rate regime. Fence sitters in the affordable & mid segments will have greater visibility of their EMIs & thus affect buying.

Amit Goyal, Managing Director, India Sotheby's International Realty:

The RBI's decision reflects their cautious approach in light of the persistent inflationary pressures and their potential impact on domestic consumption growth. However, the positive aspect is that the pause in rate hikes will instill a sense of optimism among borrowers and expect the housing sales momentum to continue.

Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS:

We expect an extended pause on interest rates from the regulator in the near future. While the inflation is expected to hover above the tolerance limit in FY24, the RBI has marginally reduced its inflation forecast to 5.1 per cent vs 5.2 per cent in the previous policy.

Amit Jain, CMD, Arkade Group:

There is no indication from the RBI that the rate cycle will change anytime soon. The path thereon will be dependent on the evolving domestic inflation and growth dynamics and the US Fed stance. RBI keeping rate unchanged is a positive move for the real estate sector and for home buyers as well as it will not impact EMIs. Therefore, we expect the momentum in home sales to continue. 

Raghvendra Nath, MD, Ladderup Wealth Management

The progress of monsoon would be keenly watched and would be one of the significant factors in deciding the direction of inflation. RBI noted that average liquidity is in surplus mode and is expected to inch up. We believe this should result in some kind of moderation in the 10-year G-Sec yield.

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