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Dolat Capital Report
Key Takeaways
Reserve Bank of India's Monetary Policy Committee has voted in majority ( six out of six) for a pause in rate hike – repo rate unchanged at 6.5% and 5 out of 6 members voted to remain focused on withdrawal of accommodation stance to ensure inflation progressively aligns with the target.
Given the uncertain outlook towards inflation, MPC has called for a continued pause. Micro management of liquidity conditions would be order of the game to align inflation to the target level of 4%.
Our view
MPC to continue with its disinflation stance and go for a continued pause in December 2023 and February 2024 policy meet. If inflation estimates given out by RBI in Monetary Policy Report holds true for 2024-25 and real rate at unity, there lies a possibility of 75-100 basis points rate cut in FY25.
Probable timing for the first rate cut lies in Q1-Q2 FY25. Risks to rate cut expectation are rise in oil and food prices.
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