Shaunpaul Simon Kavalakatt’s Post

RBI Monetary Policy 2024 Highlights: Key Decisions and Market Impact 👇 Repo Rate Unchanged at 6.5% RBI Governor Shaktikanta Das announced that the Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 6.5% for the 11th consecutive meeting. The monetary policy stance remains ‘Neutral.’ CRR Cut by 50 bps to 4% The Cash Reserve Ratio (CRR) has been reduced by 50 basis points to 4%. This move is expected to inject additional liquidity into the banking system and boost credit flow. New Benchmark: Secured Overnight Rupee Rate (SORR) To enhance the credibility of interest rate benchmarks and develop the derivatives market, the RBI will introduce the Secured Overnight Rupee Rate (SORR). This benchmark will be based on secured money market transactions, including overnight repo and TREPS. SFBs to Offer Credit Lines via UPI Small Finance Banks (SFBs) have been permitted to extend pre-sanctioned credit lines through UPI. This initiative aims to deepen financial inclusion, especially benefiting ‘new-to-credit’ customers. Inflation Projections Raised for FY25 The RBI revised its FY25 CPI inflation target upward to 4.8% (from 4.5%). Q3 FY25: Increased to 5.7% (from 4.8%). Q4 FY25: Increased to 4.5% (from 4.2%). Q1 FY26: Increased to 4.6% (from 4.3%). Q2 FY26: Estimated at 4%. GDP Growth Estimate Lowered The FY25 GDP growth projection has been cut to 6.6% (from 7.2%). Q3 FY25: Revised to 6.8% (from 7.4%). Q4 FY25: Revised to 7.2% (from 7.4%). Q1 FY26: Revised to 6.9% (from 7.3%). Q2 FY26: Estimated at 7.3%. Impact on Markets Indian equity markets (Sensex and Nifty 50) turned positive after the CRR cut announcement, signaling optimism among investors. Stay tuned for further updates as the RBI’s policy measures unfold and their implications become clearer for the financial markets and the broader economy.

The MPC's decision to hold rates while adopting a neutral stance is, in my eyes, a largely positive development, though I wouldn't deny my hopes dampening a bit due to key rates remaining unchanged. The lack of movement in terms of repo rate was probably needed to ensure continued stability in the liquidity landscape, ensuring that borrowing costs remain plateaued for both developers and consumers. Meanwhile, adopting a neutral stance implies the possibility of future rate reductions, potentially boosting future demand. In my opinion, this approach is highly nuanced, aiming to maintain the current robust status quo. Stakeholders can take advantage of this by choosing a more aggressive scale-up, particularly in light of potential future movements in benchmark rates. Read more: https://lnkd.in/dyiYV-qB The Economic Times #GDP #Inflation #MonetryPolicy

Our pre policy note, expresses uncertainty in expectations.... ....But clarity on position we will run into MPC. What will December RBI MPC decide on (i) rate cuts, and (ii) liquidity? It all depends upon whether RBI puts more focus on growth (latest GDP numbers were underwhelming), or external sector (Rupee has weakened, alongwith other EM currencies). So what would RBI focus more on? Recent History may give us clue. Before the release of GDP numbers, RBI did not ease ever tightening liquidity. The overnight rate was fixed above the repo rate, yet RBI sat on the sidelines. In fact the Variable Repo Rates (VRRs) tendered in last week of November were also for a shorter amount than required. Why did the MPC stance change in Oct policy not lead to change in ground realities on liquidity? Because post MPC, US elections occurred and that put pressure on Rupee. Probably if US elections had happened before last MPC, RBI may have waited for stance change too. Thus, it was during this time, when RBI was focused on rupee, that the ugly GDP numbers were released. How much would GDP number change RBI's views? With RBI changing its narrative so often, it is difficult to predict. Any answer to this question will be based on everyone's personal bias. RBI has generally in the past decade, and specifically in the past few months, preferred to worry more about rupee and external sector. And thus, RBI will be wary in upcoming policy, despite growth pangs. Yet, the growth shock has been large. So, base case we expect either a rate cut, OR liquidity infusion. But the expected dispersion of MPC decision is high. While not our base case, but it will not surprise us if RBI takes no action on rate cuts, or liquidity. Or it takes both action. Or any of the four actions. There is too much uncertainty. How do we run our portfolio in such uncertainty? Our portfolios will be positioned expecting a dovish action by RBI. The risk / reward for long only funds has to play into such policy actions. After all we expect bond yields to fall in time, if not on policy date. So remaining long is a reasonable risk to run into policy. Note on inflation: As usual, I haven't mentioned inflation at all. Because that is the least important parameter for me. When inflation was below 5%, RBI said that will not let go of fight against inflation until it comes to 4%. In the last MPC when inflation was above 6%, RBI said that not just inflation, but dual mandate of growth also matters. So inflation will be more of a justification than a driver of RBI decision. RBI will mention inflation in its MPC, but the decision would be based on something else. #mpc #rbi #yields #debt #inflation #repo #bonds

The RBI's latest monetary policy meeting caught people's attention because of its welcome change of stance from "withdrawal of accommodation" to "neutral," even though it kept the repo rate the same. "There is no room for complacency" was the clear message that resonated in the address. RBI Governor Shaktikanta Das said this change gives the MPC more room to move, but he stressed that inflation is still a big worry. Inflation seems to be cooling off a bit, but it's not likely to fall into the 2-4% target range anytime soon. So even with the softer stance, a rate cut probably isn't coming very soon, with the inflation horse still under close watch. As the December policy meeting gets closer, some people think it might bring a rate cut, but the overall numbers and seasonal inflation trends might make this unlikely to happen right away. As inflation risks linger, we need to focus on long-term economic growth and strong ways to handle risks in business. Innovation in processes and new age technology adoption in credit risk mitigation will continue to be on the top of agenda for banks, NBFCs and Fintech lenders. #RBIPolicy #InflationControl #MonetaryPolicy #EconomicOutlook #RepoRate #banking #CreditRiskManagement #technology #fintech #credgenics https://lnkd.in/ehFxRctz

UASA Media Release: First repo rate cut in four years brings relief UASA welcomes today’s long-awaited repo rate cut – the first in more than four years – by the South African Reserve Bank’s (SARB’s) Monetary Policy Committee (MPC). Following yesterday’s Consumer Price Index (CPI) announcement stating that inflation fell below the SARB’s 4,5% target range, the 25-basis point cut in the repo rate to 8% is a welcome relief for most workers and consumers. The prime lending rate will now be 11,50%. Given the current outlook, the repo rate will likely drop again in November by at least 25 basis points. The CPI outlook has also brightened as inflation expectations decreased to 4.8% for 2025 and 2026 from above 5%. Consequently, South African consumers can look forward to further interest rate reductions in the New Year. Although depositors will receive a lower income from interest-related investments, borrowing costs will decrease and provide relief to consumers, especially those with high levels of debt. The governor of the SARB, Lesetja Kganyago, warned that many upside risks to the CPI still exist and that the MPC will remain data-dependent at future MPC meetings. This cut will make borrowing more attractive for individuals and businesses alike, encourage consumer spending and hopefully set us on the track of economic recovery. At the very least the cut will ease the financial stress of workers in these difficult times. The next MPC meeting is on 21 November. www.uasa.org.za

RBI Keeps Repo Rate Unchanged in Bi-Monthly Monetary Policy Review https://ift.tt/wsFdDHv The Reserve Bank of India (RBI) Governor Shaktikanta Das revealed the second bi-monthly monetary policy of FY 2024-25 on Friday, marking the first policy announcement post the Lok Sabha election results 2024. The six-member Monetary Policy Committee (MPC) headed by Das decided to maintain the benchmark repo rate at 6.5%, unchanged for the eighth consecutive time, with a majority vote of 4:2. In addition to keeping the repo rate steady, the MPC decided to continue with its stance of ‘withdrawal of accommodation’, reflecting the central bank’s cautious approach towards monetary policy amid evolving economic conditions. Despite maintaining the status quo on interest rates, the RBI raised its GDP growth forecast for FY25 to 7.2% from the earlier projection of 7%, signaling optimism about economic recovery and growth prospects. However, the central bank retained its inflation forecast for FY25 at 4.5%, highlighting its commitment to price stability. Financial experts and analysts are closely monitoring the RBI’s future policy trajectory, with speculation arising about a potential change in stance in August 2024. Deepak Agrawal, CIO – Debt, Kotak Mutual Fund, suggests a higher probability of the RBI shifting its MPC stance to “Neutral” in preparation for rate adjustments in the latter half of FY 2025. Market reactions to the policy decision have been relatively muted, with 10-year Gsec yields trading within a narrow band of 7-7.03%. Nilesh Shah, Managing Director, Kotak Mahindra AMC, commends the RBI’s prudent conduct, noting the favorable economic indicators and stable market conditions. As the RBI continues to navigate through the complexities of economic recovery and inflation management, stakeholders remain attentive to forthcoming policy developments and their implications for monetary stability and growth. Follow the RBI MPC Meeting Live for the latest updates and insights from experts in the financial landscape. via https://ift.tt/7J42aSL June 07, 2024 at 12:28PM

The #clamour for a #rate #cut is rising. Will the #MPC blink as the rate setting panel gears up for the next review of the #monetary #policy from December 4 to 6? #My #View: Rate cut by #RBI is unlikely considering #Inflation risk and surging U.S. #Dollar Index (#DXY) as well as US #Treasury #Yields (#Bonds); which are factoring in proposed #tariff #hikes by Donald #Trump in January #2025.

The Monetary Policy Committee (MPC) decided to reduce the policy rate by 100 bps to 19.5 percent at its meeting held today. The MPC noted that the June 2024 inflation was slightly better than anticipated. Moreover, the external account continued to improve, as reflected by the build-up in SBP’s FX reserves despite substantial repayments of debt and other obligations. The Committee assessed that, despite today’s decision, the monetary policy stance remains adequately tight to guide inflation towards the medium-term target of 5 – 7 percent.

https://lnkd.in/gPaPTqrs The liquidity and interest rate situation is preventing a fall in yields . Bond buybacks are being conducted to ease liquidity for the next 5-6 months given better tax flows. Government may keep doing buybacks for another month or so. https://lnkd.in/gXeQCQeP Whether inflows through the bond market can even be considered "hot money" is questionable given that FPIs in FAR securities are nowhere near a level that is worrying.

The Reserve Bank's unchanging stance on Policy rates How does this status quo impact the workings of the economy? Will this be maintained even after the policy rates changes announced by the Federal Reserve? In this 499th post, we explore about the Unwavering Determination of the Reserve Bank and the grounds it holds.