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RBI Policy – On expected lines a non-event

ICICIdirect Research 09 Aug 2024 DISCLAIMER
  • The monetary policy meeting was largely a non-event on expected lines with no change in benchmark repo rate (6.5%) and liquidity stance (withdrawal of accommodation). It is the 9th consecutive meeting with no change in rates. 
  • Bond yields were absolutely unchanged. 10-year yield is hovering at 6.87%.  
  • GDP forecast remain unchanged at 7.2%.
  • Inflation for FY25 as a whole remain unchanged at 4.5%. Q1FY26 inflation is projected at 4.4%.  
  • The probability of a rate cut in October has reduced with RBI maintaining its liquidity stance as “withdrawal of liquidity” as ideally the change in stance should precede the actual rate cut.
  • Incrementally, since last MPC meeting, most major factors have turned favourable (US Fed almost certain to cut rates in September, progress of monsoon, decline in commodity prices including crude oil and gold). All these factors support dovishness, however, RBI currently may be lowering the market expectation in terms of rate cut.
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