India Monetary Policy June 2024

India: Central Bank maintains rates in June

At its meeting on 5–7 June, the Central Bank voted four to two to keep the policy repo rate unchanged at 6.50%. The decision met market expectations.

In making its decision to stand pat, the Central Bank noted that inflation has seen a sequential moderation since February 2024 and domestic economic growth has remained resilient thanks to supportive domestic demand. That said, the Bank added that volatile and elevated food inflation due to adverse weather events remains a concern.

The Central Bank also voted four to two to keep its monetary policy stance focused on the “withdrawal of accommodation”. Most of our panelists expect the Central Bank to begin cutting rates in October–December, with a total of 50 basis points of cuts by the end of FY 2024—which ends in March 2025.

The Bank’s next meeting is due on 6–8 August.

ING’s Robert Carnell commented:

“We are not forecasting the RBI to cut until the fourth quarter of this year. But we could move this up to the third quarter if the Federal Reserve begins to ease before then, as this would also take some pressure off the INR.”

Andrew Tilton, Santanu Sengupta and Arjun Varma, analysts at Goldman Sachs, said:

“In our view, going forward there are four key things that will influence the timing and quantum of the easing cycle in India: a) the RBI’s view on India’s “neutral rate”, likely to be published in the RBI Monthly Bulletin later this month, b) the fiscal consolidation trajectory and spending mix in the new government’s budget, likely in early July, c) evaluation of progress of monsoons to access potential food inflation risks, and d) sequential momentum of core inflation in Q3.”

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