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RBI maintains Hawkish stance while keeping policy rates unchanged By Ashwini Kumar Shami EVP and Portfolio Manager, Omniscience Capital

“The monetary policy committee (MPC) has left the key rates unchanged. However, the governor has maintained a hawkish stance on the policy rates. We believe that RBI is comfortable with the latest reported inflation number which came out at 4.87% but they want to communicate their continued focus on inflation and expect inflation to remain consistently around 4%. On the growth side, the FY24 forecast has been raised to 7% from the earlier 6.5% which is a conservative estimate given the first half growth was at 7.7%. With the robust growth in the economy and inflation within RBI’s target range there is less pressure on RBI to do anything urgently. Once the low inflation is maintained over a consistent period or growth falters only then it may look to cut rates. The other trigger we believe will come from a rate cut action from the US Fed or ECB. Easing of the Crude prices, increase in the forex reserves to $604 billion and India's inclusion in the global bond indices will create upward pressure on rupee if RBI doesn’t respond to FED/ECB rate cuts. Therefore, we anticipate some rate cuts by March 2024. “ 

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