RBI Keeps Policy Interest Rates Unchanged: Motilal Oswal

Motilal Oswal Report

The Monetary Policy Committee of the Reserve Bank of India kept the repo rate unchanged at 6.5% in its fifth meeting for FY24. This decision marks the fifth consecutive meeting wherein the RBI has unanimously voted to keep the repo rate unchanged on the back of substantial moderation in Consumer Price Index inflation observed in October 2023.

The MPC also decided by a majority (of five out of six members) to stay focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth.

CPI inflation moderated significantly to 4.9% in Oct-23 from 7.4% in July 2023, led by broad-based easing in all the components of CPI- food, fuel, and core. Core inflation was at a 43-month low of 4.5% in Oct-23, supported by policy rate increases and reduction in cost-push pressures across core goods and services.

However, the Governor sounded a bit cautious on the food inflation front. He mentioned that there are upside risks to food inflation which might lead to an inflation uptick in Nov-23 and Dec-23.

He further emphasised that the target of 4% CPI is yet to be reached. Inflation projection for FY24 has been maintained at 5.4% (Q3/Q4 at 5.6%/5.2%). Inflation for FY25 is expected to average 4.6% in the first three quarters of the fiscal (Q1/Q2/Q3 at 5.2%/4%/4.7%).

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