RBI MPC Meeting April 2024: RBI holds repo rate unchanged for 7th time; here is what experts say

RBI MPC Meeting today, RBI MPC Meeting outcome, RBI MPC Meeting April 2024: On Friday, April 5, the Reserve Bank of India (RBI) decided to keep the policy rate unchanged for the seventh time in a row and said that it remains vigilant towards upside risks to food inflation. Announcing the first bi-monthly monetary policy for the financial year 2024–25 (FY25), RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent.

The rate increase cycle was paused in April last year after six consecutive rate hikes aggregating to 250 basis points since May 2022. The governor said MPC will remain watchful of food inflation. The six-member rate-setting panel, by a majority vote of 5:1, favoured the status quo on the interest rate while maintaining the "withdrawal of accommodation" stance.

Here is what experts, analysts, and industry leaders have to say about the April 2024 RBI Monetary Policy Review:

Anuj Puri, Chairman, ANAROCK Group

"The decision to maintain status quo will keep the ongoing residential real estate sales momentum on course and unimpeded. Aspiring homebuyers eyeing a purchase will proceed with confidence.

Housing sales across the top 7 cities have been phenomenal in the last few quarters, even though prices are rising steadily. As per ANAROCK Research, we saw total housing sales of over 1.30 lakh units across the top 7 cities in Q1 2024 - the highest quarterly sales in the last decade. 

Average residential prices across these cities have seen a significant jump in the last one year – ranging between 10-32 per cent in Q1 2024 when compared to Q1 2023. Thus, the breather which RBI's unchanged repo rate will provide to home loan borrowers is apt and welcome."

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Madhavi Arora, Lead Economist, Emkay Global Financial Services

"As we expected, the MPC policy took recognition of the fluidity of global narratives, even as domestic dynamics have stayed favorable. This suggests that when needed, the aim of financial stability may even precede inflation management.

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 to ensure financial stability. The fluidity of global narratives and policy repricing, in conjunction with the near-term problem of plenty on INR/bonds, could make it arduous for the RBI to find a balance in its policy biases.

Thus we maintain the RBI’s tone will slowly tiptoe to ‘Gracklish’ from the usual ‘Hawk-Dove’ signaling, implying a non-committal stance and limited definite forward guidance ahead. While bull-steepening of India bonds looks to be a popular trade, the consistent repricing of Fed cuts could spill over into the RBI’s reaction function and will be cyclically noisy for bonds/FX."

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

"The decision underscores the RBI's vigilance over headline inflation, which remains above the Monetary Policy Committee's (MPC) target, amidst strong growth dynamics in India. This careful stance reflects concerns over potential inflationary pressures arising from volatile food prices, recent upticks in oil prices, and robust economic growth. 

While there was some anticipation of rate cuts by the end of 2024, the RBI seems inclined to adopt a wait-and-see approach before initiating a rate cut cycle. The RBI's current neutral policy stance appears designed to mitigate risks without unduly unsettling the debt and equity markets. This strategy highlights the RBI's priority to balance growth with inflation control, acknowledging the significant weight of volatile food components in India's retail inflation basket and the potential impact of global oil price fluctuations."

ALSO READ: RBI to soon launch app to enable retail investors to participate in government bonds 

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services

"The monetary policy has come on expected lines. Emphasising that “CPI inflation is in declining trajectory and GDP growth is buoyant” the Governor has projected CPI inflation of 4.5 per cent and GDP growth of 7 per cent for FY 25. This optimism augurs well for the stock market. Governor’s remark that “ private capex cycle is getting broad-based and capacity utilisation is improving “ is good news for the capital goods segment."

Adhil Shetty, CEO, Bankbazaar.com

"The move to keep the repo rate unchanged aims to keep inflation in check within the targeted range while sustaining market momentum. RBI's strategy reflects careful consideration of robust economic indicators, amidst factors such as monsoon performance, US federal decisions, and overall economic growth, ensuring continued high growth prospects for the country.

The expectation now is for rates to potentially adjust towards the end of this year when inflation moderates and the food inflation remains within expected parameters. This cautious approach by the RBI indicates a deliberate assessment of the impacts of previous rate actions and economic data before contemplating further adjustments.

This decision also has implications for banks and financial institutions, particularly concerning lending rates like home loan interest rates, which are linked to the RBI’s repo rate. 

A stable repo rate signals consistency in interest rates for borrowers, assuring homebuyers regarding steady loan interest rates, beneficial for both new loans and existing ones with floating rates. Stable interest rates not only enhance affordability for potential homebuyers but also foster consumer confidence, thereby sustaining demand in the real estate market.

Additionally, fixed deposit (FD) interest rates, influenced by factors like the RBI’s policies such as the repo rate, are likely to remain stable when the repo rate is unchanged. This stability benefits FD investors, especially those seeking predictable income streams, such as retirees and conservative investors prioritizing capital preservation and regular earnings."

Anitha Rangan, Economist, Equirus

"Notably, RBI has a view that domestic growth momentum led by rural recovery, private capex and government investment will remain strong into the year, and inflation is also expected to remain moderated. However the key headline risk is coming from rising geo-politics which is also getting evidenced in rising crude prices. 

The impact on inflation from the above two factors warrant a watch and staying cautious on the policy. On liquidity, RBI is likely to continue with the current tools of VRR and VRRR to manage deficit and surplus in the system. Ahead of the bond inclusion, RBI is not doing anything different to change the dynamics of policy actions or liquidity management. In summary, RBI is not lowering the guard while inflation aligns to the target. Status quo for now!"

Umeshkumar Mehta, CIO, SAMCO Mutual Fund

“RBI is in sync with the world central banks such as the US Fed, Bank of England, ECB and PBOC in keeping its interest rates unchanged. 

There were no new surprises from the MPC as inflation continues to get closer to target levels and our economy continues to grow at 7 per cent or higher for the 3rd successive year. India stands strong like a rock amongst other economies and we expect that interest rates will start pivoting sometime around the last quarter of this calendar year.”

George Alexander Muthoot, Managing Director, Muthoot Finance

"We believe moderating inflationary pressures, coupled with the realization of normal monsoon may open up the possibility of rate cuts by the RBI in the first half of fiscal 2024-25. We are encouraged by the resilience of the global economy, and continued economic growth momentum in India, coupled with relative rupee stability. A steady pick up in investment activity, and strengthening of rural demand conditions bode well for the economy and further fuels our optimism towards steady demand for gold loans, vehicle loans and home loans during the year.

We appreciate RBI’s initiative of regularly engaging with multiple stakeholders to simplify regulations and reduce compliance burden. The implementation of recommendations of the Regulations Review Authority (RRA 2.0) is a testament of the RBI’s commitment. At Muthoot Finance, we remain committed to maintaining the highest standards of corporate governance and compliance. We are in alignment with RBI’s viewpoint that regulated entities should prioritize compliance and corporate governance and we believe this is paramount for ensuring sustainable growth for India while also safeguarding customers' interests,"

ALSO READ: RBI retains GDP growth projection at 7% for FY25

Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Company

“MPC has been cognizant of robust foreign flows along with ongoing geopolitical tensions and risks emanating from higher crude prices and has thus refrained from giving any premature policy pivots. MPC continues to reemphasize the achievement of inflation targets on a durable basis and distinctly indicates rate change in the near term is unlikely. Overall, a well-anchored policy exercising caution and being data dependent amid the uncertainty in global markets coupled with key domestic events on the anvil.”

Vikrant Mehta, Head - Fixed Income, ITI Mutual Fund

“With strong US data keeping global markets guessing on the timing of the US Fed rate cut, it appears that the RBI may want to see some further traction on the same before moderating its policy stance and then towards an eventual easing of the policy rate.”

Vikas Garg – Head of Fixed Income, Invesco Mutual Fund.

“Despite elevated crude prices & food inflation, several comments like “Goal in sight” & “Elephant has gone to Forest” give a dovish tilt on inflation. Fundamental factors remain healthy as reflected in FY25 GDP at 7 per cent, manageable CAD, and record high Fx reserve. Overall, it doesn’t disrupt the expectations of rate cuts in 2HCY2024, in line with the global rate cut cycle. Market focus will be back to fiscal demand-supply dynamics which looks extremely favorable with Govt’s rapid fiscal consolidation over the next 2 years, FPI inflows, and particularly light G-Sec borrowing calendar in 1HFY25.”

Dhiraj Relli, MD & CEO, HDFC Securities

"The MPC is resolute in its commitment to align the CPI to its target of 4 per cent as uncertainties in food prices continue to pose challenges. The MPC continued with the ‘withdrawal of accommodation’ stance (with a 5:1 majority) to ensure that inflation progressively aligns with the target while supporting growth. The GDP and inflation forecast for FY25 were maintained at 7 per cent and 4.5 per cent respectively.

Despite the buoyant GDP growth and declining inflation trajectory, the RBI MPC remains steadfast ensuring that inflation aligns durably and sustainably to its target and will continue to be actively disinflationary. Domestic economic activity continues to expand at an accelerated pace, supported by fixed investment and an improving global environment. The recent uptick in fuel prices, the expectation of a harsh summer and continuing geo-political tensions pose upside risks to commodity prices and supply chains. Consequently, a rate cut soon remains unlikely. We expect a rate cut perhaps in Q2FY25 but that too would be data-dependent." 

Achala Jethmalani, Economist, RBL Bank

A status-quo policy on all fronts. With growth-inflation projections for the fiscal year unchanged, with minor quarterly revisions, is a good signal as it indicates that the economic situation is panning out as envisaged. The MPC remains cognizant of food-related upside risks to the inflation trajectory. We see a cautious pause be the case till September 2024.

Parijat Agrawal, Head – Fixed Income, Union Mutual Fund

“We expect rate cuts in the 3rd quarter of FY 25, possibly after US FOMC starts the rate cut cycle. RBI is expected to keep liquidity neutral so that further transmission of higher rates can continue. There is the possibility of modification of LCR framework going forward which may augur well for bonds.”

Gaurav Dua, Sr VP & Head – Capital Market Strategy, Sharekhan by BNP Paribas

"Monetary policy was broadly on expected lines. RBI highlighted that strong growth momentum is giving policy space to focus currently on inflation. RBI remained cautious against premature easing as RBI remains watchful on inflation due to volatile food inflation and higher crude prices but takes comfort from benign core inflation trends. This is a balanced outcome for the equity market. A review of the LCR (Liquidity Coverage Ratio) framework for banks to have strong liquidity management would only strengthen the system. We remain positive on equity markets in the near-to-medium term with real estate, banks, consumer and engineering/capital goods as preferred sectors."

Ajay Kumar Srivastava, Managing Director and CEO, Indian Overseas Bank

"The RBI MPC’s decision to keep the repo rate unchanged at 6.5 per cent is a positive move even though retail inflation continues to be above its target of 4 per cent. With the Indian economy showing signs of strong growth momentum and stability, the GDP growth projections marked at 7 per cent for FY25 is encouraging. The ECBs and NRI deposits recording higher net inflows, and forex reserves marking at an all-time high of $645.6 billion, is also building a growth roadmap for the banking sector. Another positive development has been on RBI facilitating deposits of cash at CDMs using UPI as well as permitting use of third-party UPI apps for making UPI payments from PPI wallets. All these measures are going to further enhance customer convenience and boost adoption of digital payments."

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