‘The Monetary Policy Committee (MPC) convened against a backdrop of softening headline inflation, stable core inflation, and a budget that is both fiscally prudent and non-inflationary. On the global front, recent data points to continued robustness of growth against general expectations of a slowdown. The US Fed removed the tightening bias from its statement leading to a question of when the rate cut cycle begin. Geopolitical unrest in the middle east and Red Sea region continue to possess key risks to fledgling global recovery.
Indian MPC thus maintained a status quo on rates as well as its stance (withdrawal of accommodation) as it believes the transmission of past rate hikes remains incomplete and the 4% CPI target may still be a bit distant. The MPC has projected FY25 GDP at 7.00% (FY 24 7.3%) and CPI at 4.5% (FY24 5.4%) reflecting a strong economic growth with easing inflation trajectory. The risks to these come from volatile food prices and potential supply side shocks from global factors.
Overall the RBI remains a bit conservative while trying to balance the growth-inflation balances.
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