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Below the Quote on Post Monetary Policy Committee By Prashant Pimple CIO- Fixed Income, Baroda BNP Paribas Mutual Fund

“RBI MPC in its October 2024 meeting decided to keep on hold on repo rate at 6.5% with a voting ratio of 5:1. The highlight of the policy was change in stance to ‘Neutral’, embarking a shift towards policy guidance and expectations of rate cuts.

Overall, the policy was in line with our expectations of a stance change and the language on inflation remained cautious. On growth, no change in the projections reinstates RBI’s expectations of robust economic activity in India and gives RBI the space to follow a pivot that aligns with its inflation target.

The stance change bodes well for our view on liquidity conditions as it provides greater flexibility to act based on evolving conditions and thus also supports our view on the short-term rates. 

Going forward, we expect RBI MPC policy to follow the inflation trajectory and any space for a domestic pivot is expected in Q4 FY25, where we expect inflation to be closer to RBI’s 4% target driven by winter food crop arrival. Having said that, current geopolitical conditions remain a risk to our inflation and growth projections.”

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