RBI Monetary Policy: Five analysts have this to say on repo rate action
Experts say investors' focus may also be on the medium-term forecasts laid out in the October Monetary Policy Report. (Exciting news! Mint is now on WhatsApp Channels. Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!) Mint collated the views of five analysts on what the RBI can decide on repo rate and monetary policy stance.
Here's what they said: Also Read: RBI likely to hold interest rates, policy stance-Barclays The upcoming MPC policy will see the RBI reiterating caution, amid a fluid global narrative and as markets reprice ‘higher-for-longer’. As global financial conditions transmit with a lag, there could be further volatility ahead. Even as domestic inflation is likely to meet policy targets by the end of FY24, elevated DM (developed market) rates and record-low interest differentials pose a headwind for the RBI.
Although relative forex adjustments can/should act as shock absorbers, the speed and duration of forex adjustments could still be tricky. While some may argue for a conventional increase in policy rates, we think orderly forex adjustment would be the preferred path. The liquidity toolkit is likely to be kept active with the tactical use of forex swaps, VRRR and even I-CRR/CRR.
We do expect the RBI to hold on to a status quo position this time as inflation is still high and liquidity tight. Going by RBI's forecast on inflation, it would be above 5 per cent in Q3 too, which will ensure that the status quo prevails for the calendar year for sure and probably Q4 too. Inflation for the first half of 2024 is expected to be in the band of 5-5.5 per cent and based on the RBI Governor's comment last month that 'monetary policy should be forward looking', we
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