Business News Highlights: RBI MPC Keeps Rate Unchanged At 6.5 Per Cent; FY24 Inflation Forecast Retained At 5.4 Per Cent
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The Reserve Bank of India’s (RBI’s) Governor Shaktikanta Das-headed monetary policy committee (MPC) will announce its repo rate decision on Friday. According to various reports and economists' surveys, the central bank is likely to retain the benchmark rate of 6.5 per cent. However, the recent uptick in global crude oil prices and sustained economic growth are likely to keep MPC’s focus on inflation.
According to the 71 economists surveyed by Reuters in late September, the central bank would keep its key repo rate unchanged at 6.50 per cent at the end of the October 4-6 meeting, with one expecting a 25 basis point hike.
In May 2022, the Reserve Bank of India (RBI) initiated a gradual policy rate increase, which reached 6.5 per cent by February of the following year, amidst price rise concerns arising from the Russia-Ukraine conflict. Subsequently, the RBI has maintained this rate in its past three bi-monthly monetary policy reviews.
The central government has entrusted the RBI with the responsibility of ensuring that the Consumer Price Index (CPI)-based inflation stays within the range of 4 per cent, with a tolerance margin of 2 per cent on either side.
Official data indicates that retail inflation surged to a 15-month high of 7.44 per cent in July, driven by price hikes in vegetables and other food items. In August, annual retail inflation eased slightly to 6.83 per cent from July's 7.44 per cent high, but it still remained well above the RBI's comfort level of 2-6 per cent.
The RBI's inflation projection for 2023-24 is 5.4 per cent, although Deutsche Bank, as per reports, anticipates that the RBI may revise this view to a range of 5.5-5.7 per cent while keeping the GDP forecast steady at 6.5 per cent.
Given the expectation of sustained higher interest rates in the United States, market participants are postponing their bets on RBI rate cuts to the second quarter of 2024.
The Indian economy experienced its most rapid expansion in a year during the April-June quarter, growing by 7.8 per cent year-on-year. This growth was fueled by strong services sector activity and robust demand. However, concerns loom over future growth prospects due to a five-year low in monsoon rainfall.
“I think that between the last MPC meeting in August and this time, inflation has gone up, growth remains strong while global factors have turned a little adverse in the sense that the US Federal Reserve is still aggressive in its stance, which has led to hardening of yields. In this situation, the central bank is expected to maintain a status quo on policy rates in the ensuing policy,” Crisil Chief Economist D Joshi told PTI.
What To Expect From Stock Market
On Thursday, equity indices displayed positive momentum, with the NSE Nifty 50 index closing 0.56 per cent higher at 19,546, and the S&P BSE Sensex recording 0.62 per cent rise to reach 65,631. The day's market upswing was primarily attributed to gains in technology and financial sector stocks, driven by a sense of relief stemming from a decrease in crude oil prices and a decline in US yields.
According to a Moenycontrol report, market experts said that the potential outcomes of the RBI's monetary policy decision, if the central bank opts to maintain the repo rate, would send a dual message to the equity markets. On one hand, it would demonstrate the RBI's confidence in the current economic trajectory, but on the other hand, it would signal the RBI's readiness to counteract any inflationary pressures.
Market analysts anticipate a cautious stance from the RBI in light of prevailing economic challenges. Rate-sensitive stocks may experience positive movement, but the overall equity market may not see significant shifts, as per the report.
A stable interest rate environment could encourage increased consumer spending during the festive season, especially in interest rate-sensitive sectors like real estate and auto. However, it's important to note that the RBI's underlying hawkish stance reflects vigilance against inflation, suggesting the need for businesses and investors to remain attentive to broader macroeconomic signals and potential policy changes.
PM Vishwakarma Included Under PIDF Scheme, Tenure Extended By Two More Years
The Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said it has been decided to include PM Vishwakarma under the Payments Infrastructure Development Fund (PIDF) Scheme as well as extend the tenure of the scheme by another two years. Das, who was addressing the bi-monthly monetary policy, said it is now proposed to extend the PIDF Scheme by a further period of two years, that is up to December 31, 2025.
Reserve Bank Likely To Use OMO Sale Of Govt Securities To Manage Liquidity
Shaktikanta Das, governor of the Reserve Bank of India (RBI) while announcing the bi-monthly monetary policy on Friday, said it may use Open Market Operation (OMO) sale of government papers to manage liquidity. Das mentioned the phased withdrawal of the Incremental Cash Reserve Ratio (I-CRR) ending on October 7 as part of the RBI's liquidity management exercise.
Central Bank Retains Economic Growth Forecast At 6.5 Per Cent This Fiscal
The Reserve Bank of India (RBI) on Friday said India is poised to become the growth engine of the world as it retained the GDP projection for the current fiscal at 6.5 per cent. Governor Shaktikanta Das, while unveiling the bi-monthly monetary policy review, said the domestic economy exhibits resilience on the back of strong demand.
Sensex Rises 300 Points; Nifty Reclaims 19,600 As RBI Keeps Rate Unchanged
Sensex and Nifty on Friday extended their leads as the RBI announced to keep key rates unchanged at its monetary policy outcome. The BSE Sensex jumped over 300 points to 65,953. On the other hand, the NSE Nifty50 was trading at 19,643, up 98 points. On the 30-share Sensex platform, Bajaj twins, Titan, ITC, JSE Steel, Maruti emerged early gainers. On the downside, HUL, L&T, Airtel, PowerGrid, and Axis Bank were among the losers.
RBI MPC Today: RBI Maintains Repo Rate At 6.5 Per Cent
The Reserve Bank of India's (RBI) monetary policy committee (MPC) on Friday announced its decision to continue the repo rate hike pause at 6.5 per cent for the fourth time in a row. Announcing the MPC's decision, RBI governor Shaktikanta Das said that the decision was unanimous. The governor said that with a majority of 5:1, the MPC decided to continue to focus on the withdrawal of accommodation. Governor Shaktikanta Das on Friday announced to keep policy rate unchanged at 6.5 per cent. This was fourth time in a row that the central opted for a pause in rate hike.
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