Rate cut in Q3 likely if monsoon, crude prices stable, say experts

Tribune News Service

Vijay C Roy

Chandigarh, April 5

The Monetary Policy Committee (MPC) of the RBI maintained repo rate at 6.5 per cent, which was on the expected lines of the industry. According to experts, the MPC is focusing on reducing inflation towards its 4 per cent target, comforted by high GDP growth.

The move towards maintaining stability in lending rates bodes well for the sectors, which have been consistently growing. “While there was some anticipation of rate cuts by the end of 2024, the RBI seems inclined to adopt a wait-and-see approach before initiating a rate cut cycle,”said Rajesh Sharma, MD, Capri Global Capital Limited.

Central bank in wait-&-watch mode

• Even though the RBI’s focus is on reducing inflation to 4%, price uncertainties continue to weigh on the inflation trajectory going forward
• RBI has said the tight demand-supply situation in pulses and key vegetables warrants close monitoring, given the forecast of above normal temperatures during summer

According to Shishir Baijal, chairman and MD, Knight Frank India, this move provides added support to consumers, ensuring economic growth remains robust. With the government’s revised GDP growth projection for FY 24 at 7.6 per cent, manufacturing PMI hitting a 14-year high, strong services PMI, and high Forex reserves, sentiment is further uplifted, promising sustained long-term growth for the domestic economy.

Experts are of the view that while there is expectation of normal monsoon, food price uncertainties along with rising oil prices will determine the timing of rate cuts.

Vijay Kuppa, CEO, InCred Money said, “Till inflation is around 4 per cent on a durable basis, MPC is unlikely to cut rates. So we can expect rate revisions mostly in third quarter of FY25.” However, Kishore Lodha, CFO, U Gro Capital Ltd, is of the view that the monsoon is expected to remain good, but crude prices are inching up, which again may push up inflation. Thus, food and fuel remain two areas of concern.

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#Inflation #Monsoon #Reserve Bank of India RBI