Another pause is on the cards
The Reserve Bank of India's monetary policy committee is expected to maintain status quo on policy rates in its June review, despite softer-than-expected inflation and above-expectations growth. While excess unseasonal rain may impact growth, healthy reservoir levels and the absence of El Nino until the second half of the monsoon season may not affect kharif sowing significantly. However, the possibility of a subsequent deficiency in monsoon rainfall affecting food inflation may pose an upside risk to the consumer price index inflation trajectory in the second half of fiscal year 2024.
In April, the monetary policy committee (MPC) surprised the markets with a pause on policy rates while modifying the wording of the policy stance to sharpen the focus on the 4% retail inflation target. It was emphasised that the pause was for that meeting only. However, a status quo appears to be on the cards in the June policy review as well.