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Below the Quote on outcome of MPC by Gurvinder Singh Wasan (CFA), Senior Fund Manager and Credit Analyst, JM Financial Asset Management Ltd

RBI pauses and retains stances –Rate cuts not visible, hikes cannot be ruled out.

RBI has kept repo rate unchanged at 6.5% (MSF at 6.75% and SDF at 6.25%) with 6-0 votes and retained stance at ‘withdrawal of accommodation’ with a vote of 5-1. RBI has retained GDP forecast at 6.5% for FY24 while revising inflation forecast higher from 5.1% earlier to 5.4%. RBI has also taken liquidity measures to drain out the incremental liquidity (mainly on account of deposits of Rs 2000 notes) to anchor the overnight rates towards policy rates.

Key takeaways for us are:
a) RBI has forecasted 5.2% CPI for Apr to Jun 2025 quarter which remains higher than target of 4%. RBI has clearly mentioned that keeping inflation within the tolerance band of 4%+-2% is not enough and would aim to get it to target of 4%.
b) RBI has also mentioned that India’s growth is likely to remain resilient while remaining concerned about higher food led CPI anchoring into higher inflation expectations
c) RBI has also mentioned that globally policy rates are likely to remain higher for longer
Given these, we feel there is no visibility of rate cuts as of now and would be watchful of incoming macro data in the near term.
Source: RBI

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