RBI Monetary Policy Preview - Cautious Pause To Continue: CareEdge

CareEdge Research Report

The Reserve Bank of India’s monetary policy committee will meet for the upcoming bi-monthly policy review to gauze the macroeconomic environment and decide on the monetary policy rate and stance. The decision will be announced on December 8, 2023.

Highlights:

• The economic outlook has improved significantly with a robust expansion of economic output in H1 led by upward surprise in Q2 GDP growth. The RBI may revise its earlier growth projections for FY24 up by ~20-30 basis points.

• Despite the commendable overall economic performance, specific challenges persist in certain pockets, particularly in rural demand.

• Agricultural growth remains muted amid lower-than-expected kharif output and lower reservoir levels impacting rabi sowing.

• Inflation pressures eased but food prices remain a cause of concern. A decline in agricultural production could pose an additional upside risk to inflation figures.

• The RBI to focus on liquidity management and personal credit growth. While an overall tight liquidity situation is anticipated, the RBI aims to ensure that it does not unduly impede credit growth.

• The RBI is likely to continue supporting economic growth, while remaining cautious on inflation. Therefore, we anticipate that the RBI will keep its policy rates and stance unchanged. We do not anticipate any further rate hikes by the RBI in this fiscal year.

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