Perspective on RBI Monetary Policy Committee by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
Below the Perspective on RBI Monetary Policy Committee by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
“With last inflation data above the target band and growth slowing, RBI chose a cautious approach and maintained status quo on policy interest rates. The concern is not just on domestic food inflation but also global inflationary risks in midst of geopolitical conflicts and trade war. RBI has upwardly revised the average inflation projection for FY25 to 4.8%, bringing it in line with our expectations. As expected, RBI has lowered the overall GDP growth for FY25 to 6.6%, marginally higher than our expectations of 6.5%. While RBI will be cautious on growth, they don’t seem to be overly concerned. The Central Bank has highlighted that the slowdown in growth has been limited to few sectors and overall growth is expected to pick up in the second half of the year.
The volatility in the global markets and RBI intervention in the forex market has been posing a challenge and RBI CRR cut of 50 bps will provide comfort on the liquidity front. This will also prepare the ground for a rate cut going forward.
We expect RBI to go for a shallow rate of 50 bps in 2025. CPI inflation is likely to moderate below 5% in Q1 2025 and that will provide the window for RBI to start the rate cutting cycle. There is no denying that there are some concerns on growth front and as RBI gets comfort on food inflation front, they would initiate a shallow rate cut cycle’’.
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