The central bank is widely expected to maintain a status quo on key policy rates. RBI governor Shaktikanta Das will announce the interest rate decision of the bimonthly monetary policy meeting at 10 am. The status quo is expected to be maintained on policy rates while observing the impact of global headwinds on Indian economic growth and inflation.
Read RBI Monetary Policy 2024 LIVE Updates here
“While the upcoming policy may not see material changes in macro assessment by RBI, issues like case & timing of policy pivot/stance change, factors influencing liquidity management ahead and, of course, assessing which part of the yield curve has the maximum juice, etc would be key for markets," said Madhavi Arora, Lead Economist at Emkay Global Financial Services.
Here are five key things to watch out for in RBI policy today:
Repo Rate
Analysts and economists on D-Street widely expect the RBI to keep its key repo rate unchanged at 6.50% in the April policy meeting for the seventh time in a row. The repo rate is the interest rate at which the central bank lends short-term funds to commercial banks. The repo rate has been kept unchanged since April 2023.
At present, Repo Rate stands at 6.5%; Standing Deposit Facility Rate is 6.25%; Marginal Standing Facility Rate is 6.75%; Bank Rate is at 6.75%; and the Fixed Reverse Repo Rate is at 3.35%.
Also Read: RBI MPC meeting: Rate pause may continue on GDP growth, inflation; Key indicators to watch
Policy Stance
The RBI is likely to continue with its stance of ‘withdrawal of accommodation’. The central bank’s policy stance indicates the thinking within the Monetary Policy Committee.
GDP Growth Target
India's GDP growth rate in the quarter ended December 2023 stood at 8.4%, sharply above RBI’s estimates. However, in its February policy, the RBI had projected India’s GDP to grow at 7% in FY25. Economists believe the central bank may revise its GDP growth target.
Shraddha Umarji, Economist - Institutional Research at Prabhudas Lilladher expects GDP growth for FY25 might be revised upwards to 7.3-7.4% from 7% earlier as all macroeconomic data has been robust.
Also Read: RBI monetary policy outcome today: Time, how to watch LIVE streaming, and other details
Inflation Forecast
India’s consumer price index (CPI)-based inflation stood at 5.09% in February, higher than the central bank’s target of 4%. RBI had forecast retail inflation at 5.4% in FY24, with Q4FY24 at 5%.
RBI’s future interest rate trajectory will largely depend on the inflation trends. Hence, the comments on inflation by the central bank governor Shaktikanta Das will be keenly watched out amid rising crude oil prices.
Liquidity measures
RBI is likely to continue maintaining liquidity through repo and reverse repo auctions and also manage daily liquidity positions. Any liquidity measures announced by the central bank will be important for the money and bond markets.
Also Read: India's monetary stance: Navigating through a global economic maelstrom
“The sovereign yield curve has seen flattening bias in 4QFY24, aided by announcement of lower FY25 budgetary gross borrowing/initial fall in global yields, while tighter liquidity kept the shorter-end an elusive trade. We see this reversing as we enter FY25, and expect bull-steepening through 1HFY25, helped by surplus system liquidity, lower sub-7Y issuances and more FPI positioning in sub-7Y, new banks’ investment guidelines/upcoming bond-forwards guidelines may favor shorter tenor positioning," said Arora.
However, fading expectations of early rate cuts by RBI could mar the G-Sec trade, led by shorter-end, she added.
Also Read: RBI policy today: Can RBI precede US Fed in cutting rates? Top experts weigh in
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