Anticipate repo rate cut only in late 2024: SBI Capital Markets
Jun 09, 2024
New Delhi [India], June 9 : SBI Capital Markets anticipated an interest rate cut late in the calendar year 2024, adding that the Reserve Bank of India (RBI) is now focusing on local disinflation and growth while monitoring global trends.
The report of SBI Capital Markets further added that RBI's effective monetary and fiscal policies led to a stellar real growth of 8.2 per cent year on year in the financial year 2024.
The apex bank on June 7, decided to keep the repo rate unchanged at 6.50 per cent, the eighth time in a row.
It noted that the economy is at a turning point, with the RBI's revised growth projection of 7.2 per cent for FY25.
The report commented, noting the RBI's stand of not following the US Fed's action, that factors like global monetary easing, fiscal consolidation, bond inclusion flows, cooling inflation, and expected rate cuts after late 2024 are expected to bring 10-year yields below 7 per cent in the medium term.
"With enhanced fiscal buffers bolstered by RBI dividend amidst varying expectations from fiscal policy, expected agricultural recovery due to favourable monsoons, and anticipated pick-up in manufacturing capex as well as global trade, our confidence on FY25 real GDP forecast of 7 per cent year-on-year grows," the report added.
RBI on Friday kept the inflation projection for 2024-25 at 4.5 per cent with Q1 at 4.9 per cent, Q2 at 3.8 per cent, Q3 at 4.6 per cent, and Q4 at 4.5 per cent.
The consumer price inflation (CPI) has been moderating since February 2024, though the difference has been narrow, from 5.1 per cent in February to 4.8 per cent in April 2024.
Food inflation has been a challenge for the regulator as it is still elevated because of the price rise in vegetables, pulses, cereals, and spices.
India's GDP increased by an impressive 8.2 per cent in the fiscal year 2023-24, cementing the country's position as the fastest-growing major economy. India's GDP expanded by 7.2% in 2022-23 and 8.7% in 2021-22, respectively.
