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Repo Rate Remains Unchanged This morning, the RBI's Monetary Policy Committee decided to keep the repo rate steady at 6.5% - a move that's keeping borrowing costs unchanged for the tenth time in a row. But there's more to it: The RBI has shifted its policy stance from 'withdrawal of accommodation' to 'neutral'. This means the RBI is now positioning itself to be more adaptable, potentially paving the way for future rate adjustments. GDP growth is retained at a robust 7.2% for FY25. This reflects confidence in our economic resilience despite global headwinds. Inflation is held at 4.5% for the fiscal year. With geopolitical tensions and food prices in flux, this stability speaks volumes about RBI's cautious optimism. Why Does This Matter? Despite pressures from food and fuel, the RBI believes in our economy's growth story. The neutral stance indicates a readiness to either control inflation or boost growth as needed, ensuring we're not caught off-guard by global economic shifts. As the repo rate remains unchanged, loan rates linked to this rate will stay the same, meaning borrowers won't see their EMIs rise. It's anticipated that the RBI might reduce the repo rate by 0.5% in December 2024 if food prices go down. What are your thoughts on this? How do you think this policy impacts us?

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

Fixed income markets rebounded in Q2 2024. Interest rate cuts by the Bank of Canada and ECB, along with narrowing credit spreads, bolstered returns. The outlook for fixed income remains positive for 2024. Learn more in this latest commentary by Owen Morgan. https://lnkd.in/gt5GHin7 #FixedIncome #MarketReview #Investing

The outlook for fixed income is positive on the whole. Income investors can benefit from the asset class in their portfolios again ... Read our Q2 Review for latest insights.

My Analysis: Expect no Rate Cuts It is indeed unlikely that the RBI's Monetary Policy Committee (MPC) will cut rates in the near future. One of the key reasons is the central bank's focus on controlling inflation and maintaining economic stability. The MPC has maintained the repo rate at 6.5% since February 2023, and there is a strong consensus among analysts and experts that this rate will likely remain unchanged in the upcoming policy review [[❞]](https://lnkd.in/dYT3t4UE) [[❞]](https://lnkd.in/dutJq-Gh). Moreover, the RBI has been resorting to unconventional methods to manage excess liquidity in the market. These methods include open market operations (OMOs) and the use of instruments like the standing deposit facility (SDF), which help absorb surplus liquidity without altering the policy rates directly. This approach helps in managing inflation and stabilizing the economy while avoiding the potential negative impacts of frequent rate changes [[❞]](https://lnkd.in/dCJNXPPa). Given the current economic indicators and inflationary pressures, a rate cut does not seem imminent. The RBI is expected to continue its cautious approach, closely monitoring economic conditions and using a mix of conventional and unconventional tools to achieve its monetary policy objectives.

Are you aware? Rising Statutory Liquidity Ratio help control economic inflation. 🤔 Okay, so let's first clarify what the Statutory Liquidity Ratio is before understanding the larger picture. Statutory Liquidity Ratio popularly called SLR is the minimum percentage of deposits that the commercial bank maintains through gold, cash and other securities. In other words, any commercial bank must maintain reserves in cash, gold, or other securities as required by RBI regulations. Alright, so here are the reasons- The first is to keep financial institution's liquidity stable, to Encourage the purchase of government securities and control the flow of credit and inflation. According to RBI regulations, the current SLR is 18%, meaning that for every 100 Rp deposits made into the bank, 18 Rp must be retained in liquid assets. If the SLR is raised to 40%, the government will directly prevent further inflation in the economy. This means that for every 100 Rp, they will have 40 Rp in liquid assets, leaving only 60 Rp available for banks to lend to consumers, resulting in less money moving around in the economy. Thus, by raising SLR, the economy's money supply can be limited, resulting in a decrease in inflation. Conversely, if SLR declines, a lot of money is available in the markets, increasing inflation. This is how the government manages inflation in relation to SLR. #stockmarket #economy

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

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.

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.