Skip to main content

RBI to hold rates at 6.50% through mid-2024, cut seen in Q3: Poll

By

 The Reserve Bank of India (RBI) will keep its key interest rate unchanged at 6.50% for a fifth consecutive meeting on Dec. 8 as inflation worries ebb, according to a Reuters poll of economists who unanimously expect the central bank's next move to be a cut. Despite inflation falling to a four-month low of 4.87% in October, it is expected to remain above the RBI's 4% medium-term target for at least another two years. That is likely to keep the RBI from changing its hawkish bias anytime soon. All 64 economists in the Nov. 17-30 Reuters poll expected the central bank to hold the repo rate at 6.50% at the conclusion of its Dec. 6-8 meeting. "We expect the Reserve Bank to stay put. We're not expecting a rate cut before Q3 2024," said Dhiraj Nim, economist at ANZ research. "If they are beginning to see inflation aligning with the 4% target... for one or two meetings, it will be sufficient evidence for the RBI to start pivoting."

 

While the poll medians still showed the first rate cut coming in the third quarter of the calendar year, almost half of economists forecast it will come in the second or earlier. Slightly more than half of respondents, 29 of 56, see the repo rate on hold at 6.50% through the middle of 2024, while 22 expect a quarter percentage point cut to 6.25% by mid-year. The remaining five see a half point cut to 6.00% by end-June. More than three-quarters of a smaller sample of respondents, 33 of 43, said the repo rate would be at the poll median of 6.25% or lower by end-September. The remaining 10 said the repo rate would still be at the current 6.50%. Inflation was forecast to average 5.4% this fiscal year that ends in March and 4.8% in fiscal 2024-25, still relatively high in the 2-6% target range even as the central bank starts to cut rates, a separate Reuters survey showed. "I think the RBI's focus is to keep it at around 5%... They will be comfortable with it because of the volatile nature of food inflation and the kind of weather and climate risk that we are seeing," said Suman Chowdhury, chief economist at Acuite Ratings and Research.

 

-Business Standard 1st Dec, 2023.

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more