Key Points
The stronger than expected real GDP growth print for the third quarter of the fiscal as well as US Fed's indication towards a possibility of rate cut not before late-2024 rate may prompt the Reserve Bank of India to continue status quo on policy rate for a longer time than what was being projected earlier...
"Given the bullish Goldilocks economic assessment with FY25 growth estimate at 7% year-on-year, and inflation at an above-target 4.5%, we trim our rate cut call to 50 basis points in FY25, starting in October, against our previous expectation of 100 bps by April 2025," DBS Bank senior economist Radhika Rao said...
"Clearly, the higher-than-expected momentum in the economy may lead to a tight monetary policy from RBI for a longer period and any reversal in the current stance is unlikely over the next six months," said Suman Chowdhury, chief economist at Acuit Ratings & Research...
"The central bank has projected inflation to come to less than 5% only in Q2 and hence this will be the earliest point when one can expect a rate cut provided monsoon conditions look okay," he said, adding that inflation would be guided more by monsoon shocks and higher food prices while the world economy appears to have adjusted to the Ukraine and Hamas crisis as also the Red Sea issue...
On the assumption of a normal monsoon next fiscal, RBI expects CPI to be at 5% in the first quarter, 4% in the second quarter, 4.6% in the third quarter and 4.7% in the fourth.. Strong growth coupled with projections of softening in inflation prints in the coming quarters offer a meaningful cushion for policy makers, said Bandhan Bank chief economist Siddhartha Sanyal..
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