RBI Monetary Policy Review - Being More Pragmatic In Policy Making: Dolat Capital

Dolat Capital Report

Monetary Policy Committee has voted in majority (four out of six) for no change in rate – repo rate kept unchanged at 6.5% and all members voted to change the stance to neutral. MPC remains unambiguously focused on a durable alignment of inflation with the target while supporting growth.

Our view –

The decision to hold on to rates and stance and cash reserve ratio cuts by 50 bps highlights the pragmatic thought process of the MPC. Even though the growth slowed down in H1 FY25 but it is possible that MPC has considered to look past the data as some drag in growth momentum was led by base effects as well as other idiosyncratic factors.

As per RBI latest estimates, 2HFY25 GDP is expected to grow at 7% versus 6.1% in H1 FY25. Going forward, members would continue to monitor the growth trajectory. On inflation side, although the cost pressures may sustain in the very near term on account of higher food prices but over the next few quarters the pressures should subside with higher mandi arrivals, buffer stocks and good Rabi sowing.

CRR cuts would provide the much-needed liquidity impetus (of nearly Rs 1.16 lakh crore), which otherwise may have witnessed a drag on account of higher CIC and tax outflows.

We expect a possible rate cut at the Feb'25 policy meeting. Risks to a delay in rate cuts are factors like rise in commodity prices, uneven and slow disinflation witnessed in food prices in lieu of weather-related shocks and shortage of fertilizers and continued FX volatility.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.