SBI forecasts no rate cuts in April RBI MPC meet

Updated : Apr 02, 2024 10:53
|
Editorji News Desk

As the Reserve Bank of India gears up for its Monetary Policy Committee meeting scheduled from April 3-5, the State Bank of India has released a research report indicating that rate cuts are unlikely to be on the agenda for the upcoming meeting. According to the SBI, any potential rate cuts are expected to materialize only in the third quarter of the financial year 2024-25 (FY25).

In its report, the SBI highlighted that central bank rate actions in emerging economies often follow those of advanced economies. However, it noted that India appears to be an exception, with the first rate cut by the RBI anticipated in Q3FY25. Furthermore, the report suggests that any rate cut cycle initiated by the RBI is likely to be shallow, emphasizing the importance of maintaining a stance of withdrawal of accommodation.

This prediction from the SBI comes in the wake of the US Federal Reserve's decision to maintain its benchmark overnight interest rate within the range of 5.25-5.50% and uphold its outlook for three cuts in borrowing costs throughout the year.

Discussing inflation, the SBI report forecasts a decline until July, followed by an uptick, with September potentially seeing a peak of 5.4%. However, it anticipates a subsequent deceleration, projecting CPI inflation to average at 4.5% for the entirety of FY25.

The RBI has maintained the repo rate at 6.5% since the April monetary policy meeting in 2023 and continues to prioritize the withdrawal of accommodation. The SBI report attributes current inflation trends primarily to food price dynamics, with future inflation levels hinging on evolving food prices.

Regarding liquidity, the SBI notes a decline in liquidity deficit since the previous policy meeting in February. Additionally, it expects deposits and credit in the banking sector to witness growth rates of 14.5-15% and 16.0-16.5%, respectively, in FY25.

Despite geopolitical tensions and concerns over a prolonged high-interest-rate environment, India attracted the highest foreign fund inflows among Asian markets in March. The SBI predicts a potential surge in debt inflows alongside equity inflows in the coming period, driven by passive investments in bonds under various indices.

With the SBI's insights shedding light on the monetary policy outlook, stakeholders eagerly await the RBI MPC meeting for further clarity on the trajectory of interest rates and other policy measures.

Also Watch: GST collections hit ₹1.78 lakh crore in March, second highest since roll-out

SBI

Recommended For You

editorji | Business

Mallya Calls for Justice Over Excess Debt Recovery and Legal Inconsistencies

editorji | World

UK PM Keir Starmer hosts Indian business chiefs to boost investments

editorji | Business

Bangladesh Government Plans to Renegotiate Power Deal with Adani Power, Citing Unfair Terms

editorji | World

New Zealand falls into recession with abrupt economic slowdown

editorji | Business

Dollar Pushes Indian Rupee to Record Low of 85, Fed's Policy Outlook in Focus