RBI’s December policy review: Status quo to continue

livemint.com:

Bank of India is likely to hold the key interest rates in its December monetary policy review and continue with its emphasis on containing inflation, which has shown encouraging trends the past two months. Macroeconomic indicators remain healthy, with GDP growing at 7.6% in Q2, exceeding expectations. With economic growth continuing to be strong, the central bank will focus mainly on inflation, liquidity, and currency management.

Given the global economic trends and geopolitical situation, expect RBI to keep its key rates and stance unchanged. Given the likely status quo, the market will instead closely track the narrative from RBI’s monetary policy committee (MPC) for direction on rates and liquidity over the next few quarters. Expect the central bank to continue with the same narrative—inflation targeting at 4%, ensuring price stability, keeping a close watch on global trends, and providing sufficient liquidity to support growth.

In the United States, inflation has been showing signs of easing, resulting in lower market yields. Signals from the US Federal Reserve indicate its rate cycle will likely remain steady; the market is expecting a rate cut in mid-2024. In short, there seems to be a softness as far as interest rates and the macros are concerned in the US.

Globally, while China and Europe are still grappling with relatively slowing growth, emerging economies are faring better. Geopolitical tensions, however, remain with the ongoing conflict between Israel and Hamas, and the economic uncertainty in China. And though crude prices have remained stable to soft, we will have to continuously monitor the scenario to see how it would collectively impact India.