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Business News/ Economy / RBI policy today: Can RBI precede US Fed in cutting rates? Top experts weigh in

RBI policy today: Can RBI precede US Fed in cutting rates? Top experts weigh in

RBI policy today: RBI is expected to maintain current policy rates and stance on April 5 as the Indian economy is in a robust position and inflation is still above its target of 4 per cent.

RBI policy: RBI Governor Shaktikanta Das will announce the policy decision of the Monetary Policy Committee (MPC) on Friday, April 5.

RBI policy today: As the Reserve Bank of India (RBI) prepares to announce the monetary policy decision for the first meeting of the financial year, there are expectations that the central bank might address uncertainties regarding rate cuts.

While the April policy decision may maintain current policy rates, the market is eager to know if the RBI will cut rates before the Fed.

With the Indian economy in a robust position and inflation still above its target of 4 per cent, the RBI is unlikely to rush into cutting rates. Instead, it is anticipated to continue utilizing other available tools to address excess liquidity.

RBI Governor Shaktikanta Das will announce the policy decision of the Monetary Policy Committee (MPC) on Friday, April 5.

Also Read: RBI Monetary Policy Committee Meeting this week: Date, time and what to expect

We collated the views of leading experts to understand what they expect from the RBI this time, whether the RBI can precede the US Fed in cutting rates, and how the market could behave after the policy outcome. Take a look:

Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India

To test the hypothesis of future values of emerging economy rates being influenced by past values of advanced economy rates, granger causality tests, involving the data from Jan 2008 to Mar 2024, show that all major emerging economies rates such as Indonesia, India, Malaysia, Saudi Arabia, and Thailand are influenced by past movements of US rates or UK rates.

A lag of two months is found to be the optimal lag of operation in the interplay of these rates across countries. RBI might cut rates only in Q3FY25.

We believe the stance should continue to be the withdrawal of accommodation. The rate-cut cycle is likely to be shallow.

Also Read: RBI policy meet starts tomorrow: SBI says there could be no rate cut before Q3FY25; here's why

Madhavi Arora, Lead Economist at Emkay Global Financial Services

RBI may be pegged to the Fed on rate actions, while still ensuring operative call money rates do not go below repo (VRRR may stay the primary tool, but OMO sales could be used too, hinging on gauging the nature of liquidity/other global dynamics).

We think the RBI’s tone will slowly tiptoe to ‘Gracklish’ from the usual ‘Hawk-Dove’ signalling, implying a non-committal stance and limited definite forward guidance ahead.

The fluidity of global narratives and policy repricing, in conjunction with the near-term problem of plenty on INR/bonds, could make it arduous for the RBI to find a balance in its policy biases.

While the upcoming policy may not see material changes in macro assessment by RBI, issues like (1) case and timing of policy pivot/stance change, (2) factors influencing liquidity management ahead and, of course, (3) assessing which part of the yield curve has the maximum juice, etc would be key for markets.

While bull-steepening looks to be a popular trade, the consistent repricing of Fed cuts could spill over into the RBI’s reaction function and will be cyclically noisy for bonds and forex.

Also Read: RBI policy meet starts on April 3: Status quo on rates, change in stance possible? Here's what top experts say

Achala Jethmalani, Economist, RBL Bank

The policy decision in a 5:1 vote is seen as status quo and the stance may be retained as ‘withdrawal of accommodation’.

A status-quo policy will largely be viewed as a non-event by market participants.

Like fielders on the cricket field, what will be watched out for is any sharp revisions in CPI inflation even as GDP growth figures are likely to be revised upwards.

For the bonds market, the major announcement concerning issuances in the first half of the financial year 2025 (1HFY25) and a status-quo policy, yields could move +/-5bps, not more.

Any guidance on liquidity management in the run-up to the General Elections or a modest tweak in the reserve requirement framework would only be rates positive.

Also Read: India's services growth picks up in March on robust demand

Tanvee Gupta Jain, Chief India Economist, UBS India

Considering India's growth momentum remains robust, we think there is no urgency for the MPC to change policy settings (rates and stance) in the upcoming policy meeting scheduled on April 5.

We expect the shift in policy stance to "neutral" to likely happen in the June policy.

We maintain our call for a shallow rate cut cycle in FY25 (cumulative 50bp), following the Fed pivot in June (UBS forecast) and as India's real policy rate also starts inching into restrictive territory (amid faster-than-expected disinflation).

Also Read: India's monetary stance: Navigating through a global economic maelstrom

Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays

We expect the MPC to keep the repo rate on hold at 6.5 per cent, and maintain the monetary policy stance at a "withdrawal of accommodation".

The RBI has dialled back its hawkishness on liquidity management since the February meeting, allowing weighted average call rates to drift lower.

We expect the RBI to find comfort in declining core inflation, which continues to lose momentum, suggesting little sign of overheating from demand-pull pressures.

Also Read: The anatomy of a post-crisis monetary policy, explained

Suman Bannerjee, CIO, Hedonova

We think the Reserve Bank of India (RBI) will likely maintain the repo rate at 6.5 per cent.

If this goes as anticipated, it would reinforce stability in the financial markets.

This decision aligns with market expectations and reflects the RBI's commitment to managing inflation and supporting economic growth.

Consequently, we anticipate it could sustain positive market sentiment, bolstering investor confidence in the domestic economy.

However, any unexpected deviation from this anticipated decision could introduce uncertainty and potentially lead to fluctuations in market dynamics, influencing investment strategies in the short term.

CARE Ratings

The MPC will contemplate rate cuts in the second half of FY25 as headline inflation approaches the 4 per cent threshold.

The policy rates will likely be kept on hold in the upcoming policy meeting, with no change in stance.

While there has been broad-based moderation in inflation, higher food inflation keeps headline numbers elevated. However, benign core inflation will comfort RBI.

The RBI will thus be inclined to adopt a cautious approach, preferring to assess the evolving risks associated with food inflation before making any changes in its decisions.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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