“The RBI maintained the status quo on policy rates and stance, aligning with the market expectations. The headline CPI projection for FY24 remains unchanged at 5.4%, despite uncertainties around production due to the lower kharif sowing, low reservoir levels, and volatile global food and energy prices. The RBI governor reiterated the intention to bring inflation to a level of 4% on a durable basis. In line with its monetary policy stance, the RBI may need to consider OMO-sales to manage liquidity as necessary.
Given recent inflationary pressures driven by food & vegetable prices in India, the extended tightening measures by global central banks, and the RBI’s commitment to lower domestic inflation to 4%, the outlook for interest rates appears cautious in the near term. The possibility of OMO-sales to manage liquidity may pose short-term pressure on interest rates. We believe that the RBI’s future actions will depend on evolving data, and we continue to expect a long pause.” – Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life