RBI Monetary Policy update – October 2023

Against the backdrop of subdued global indicators that have impacted the majority of global markets due to concerns over rising inflation rates, escalating crude oil prices, and an elevated 10-year Treasury yield, India’s central bank, the Reserve Bank of India (RBI), has offered some relief.

The Monetary Policy Committee (MPC) of the Reserve Bank of India has chosen to maintain the status quo for the fourth consecutive time, keeping the policy repo rate unchanged at 6.5%. It appears that there is expected to be no impact on home loans and other EMIs.

RBI Governor Shaktikanta Das underscored that economic activity has displayed resilience, largely propelled by strong demand. He noted that the Indian banking system has remained robust, thanks to improved asset quality. He also emphasized that the bedrock of our country’s progress lies in macroeconomic stability and promoting inclusive growth.

Furthermore, the Governor reiterated that the MPC will maintain a vigilant stance on inflation and remain steadfast in its commitment to bringing inflation in line with the targeted levels. He stressed that the central bank is aiming for inflation at 4%, not within the range of 2-6%. The committee has projected that CPI inflation will moderate to 5.2% in the coming year, down from the current level of 6.8%. This moderation is expected to be driven by a decline in the prices of vegetables and cooking gas cylinders.

The central bank has maintained its GDP growth forecasts for various quarters. The GDP growth forecast for the second quarter of FY24 remains at 6.5%, while it stands at 6.0% for the third quarter of FY24. The forecast for Q4FY24 remains unchanged at 5.7%. Additionally, the GDP growth estimate for Q1FY25, which covers April to June 2024, remains steady at 6.6%.

Indian benchmark indices opened the session on a positive note and extended their gains as the MPC met market expectations. While most sectors demonstrated resilience, the information technology, consumer durables, and real estate sectors recorded the most significant gains.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to change. Please consult an expert before making related decisions.