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GLOBAL MARKETS

* Federal Open Market Committee (FOMC) in its Feb meeting, agreed to keep the target range of its Fed Funds Target Rate (FFTR) unchanged at 5.25%-5.50%.

* This was the sixth consecutive pause after having raised rates for ten meetings in a row before taking a first pause in June followed by another 25-bps hike in July 2023.

* The European Central Bank and Bank of England also kept their deposit rates unchanged.

* Rate cuts not expected in India during calendar year. However, the increased demand may drive up the rates.

RBI POLICY ACTIONS

* RBI in its monetary policy has been maintaining its repo rates at 6.50%. These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

* Maintaining the stance, RBI mentioned it is a pause and not a pivot, after cumulative 250 basis points of hike in repo rates since April 2022 and has majorly been on a longish pause in CY2023.

* In contrast to global trends, domestic economic activity exhibits resilience on the back of strong domestic demand. The RBI revised its FY24 GDP growth projections by 50 basis points to 7.0% from the previous policy.

* The stellar full year growth is led by the manufacturing sector and construction sector, while there has been some moderation in the services sector growth.

* In terms of quarterly growth, the GDP growth of 8.4% in Q3 FY24 marks the highest in six quarters. Although industrial growth experienced a sequential slowdown, it maintained a double-digit growth momentum, expanding by 10.4% YoY in Q3 FY24.

INDIAN GROWTH

* In contrast to global trends, domestic economic activity exhibits resilience on the back of strong domestic demand. The RBI revised its FY24 GDP growth projections by 50 basis points to 7.0% from the previous policy.

* The stellar full year growth is led by the manufacturing sector and construction sector, while there has been some moderation in the services sector growth.

* In terms of quarterly growth, the GDP growth of 8.4% in Q3 FY24 marks the highest in six quarters. Although industrial growth experienced a sequential slowdown, it maintained a double-digit growth momentum, expanding by 10.4% YoY in Q3 FY24.

DOMESTIC INFLATION

* The RBI aims to reduce the CPI Inflation in the target band of 4% +/- 2%.

* CPI inflation for the month of April has come at 4.83% YOY with core inflation (which excludes food and energy prices) at 3.2%.

* Food inflation is at 7.9% as vegetables prices have not come down Seasonally. This is due to heat wave conditions prevailing in the economy.

* The initial estimates of the Indian Metrological Department is of normal monsoon which should cool down CPI inflation in the second half of the fiscal year.

* The Inflation Projections given by RBI projects inflation to be in the lower end of the target band till Q2 FY25

CURRENCY

* Most global currencies were under pressure as dollar strength resurfaced led by diminished possibility of a Fed rate cut in Jun’24.

* Even so, the performance of INR was much better relative to other peers, given that India’s macro fundamentals remain fairly robust.

* The USD-INR exchange rate fluctuated between 83.23 and 83.68 with an average of 83.41 in April 2024.

* Indian currency the best performing currency due to strong macro economic indicators and RBI two-way intervention in currency markets

FOREX

* Foreign exchange reserves declined to USD 637.9 in April 24 from USD 645 bn in March 24.

* The central bank intervenes in the spot and forwards markets to prevent runaway moves in the rupee.

* Apart from the central bank's intervention, changes in foreign currency assets, expressed in dollar terms, include the effects of appreciation or depreciation of other currencies held in the RBI's reserves.

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