When can you expect an RBI rate cut? What Ajay Bagga thinks
The RBI Governor reiterated the RBI’s medium-term target of four per cent for headline inflation, stating that consumer prices appear to be easing but remain above the central bank’s goal.
When can you expect the RBI to announce a reduction in the repo rate? Market expert Ajay Bagga believes that a rate cut by the RBI is possible in October or November. In an interaction with Business Managing Editor Anil Singhvi, Bagga said that the latest RBI policy was well balanced wherein Governor Das stated with humility that the real inflation target is below four per cent, which is yet to be achieved.
“The central bank will be keenly watching the monsoon 2023 this year as if India receives normal monsoon as lower than estimated monsoon could dent the rural demand and may also increase food inflation,” Bagga said.
His remarks came after RBI Governor Shaktikanta Das announced a status quo on the repo rate — the key interest rate at which the RBI lends money to commercial banks — as well as the policy stance, at “withdrawal of accommodation”. Currently, the repo rate stands at 6.5 per cent, a level it reached in February this year owing to six hikes, of a total 250 basis, by the RBI in a monetary tightening cycle that began in May 2022.
The RBI did not declare a victory over sticky inflation, Bagga said, praising the policy statement. The RBI Governor reiterated the RBI’s medium-term target of four per cent for headline inflation, stating that consumer prices appear to be easing but remain above the central bank’s goal.
“Being within the tolerance band is not enough,” Das said. The RBI has set a goal to contain inflation at four per cent, with a tolerance band of two per cent on either side. The central bank tracks headline inflation closely for formulating its monetary policy.
Consumer inflation — or the rate of increase in consumer prices determined by the Consumer Price Index — eased to an 18-month low of 4.7 per cent in April. The RBI Governor has already indicated that the May print could be lower than the April reading.
Bagga also pointed out the RBI’s policy stance of “withdrawal of accommodation”. “If MPC had taken a ‘neutral’ stance, the yield curve would have shown rate cut in the next policy,” the market expert said.
The RBI’s policy was along expected lines. According to a poll of economists by Zee Business, all of the respondents had expected the MPC to keep the repo rate at 6.5 per cent in the June review. Only one-fourth of the economists had expected a change in stance.
Catch latest on stock market updates and minute-by-minute coverage on the RBI policy review. For all other news related to business, politics, tech, sports and auto, visit Zeebiz.com.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
EPFO Pension Schemes: Early pension, retirement pension, nominee pension and 4 other pension schemes that every private sector employee should know
Tata Motors, Muthoot Finance and 3 more: Axis Direct recommends buying these stocks for 2 weeks; check targets, stop losses
02:31 PM IST