Cautious RBI guides for key policy rates to stay higher for longer
Growth projection for FY24 remains unchanged at 6.5%, as the RBI continues to expect that growth will be led by sustained buoyancy in services, revival in rural demand, consumer and business optimism, government’s thrust on capex, and healthy balance sheets of banks and corporates.
The status quo on key policy rates maintained by the Monetary Policy Committee (MPC) was no surprise. The softening in agro commodity prices in recent weeks offered the MPC better breathing space in the near term. However, the RBI is emphatic in underscoring that it should not be misinterpreted as lowering of the central bank’s vigil against inflation. The governor reiterated that the RBI remains committed to achieve the headline CPI target of 4%, rather than merely bringing inflation within its tolerance band (i.e., 2-6%).