# Reserve Bank of India Maintains Rates, Yet Remains Poised for Cuts in Q4 2024

- Link: https://www.thailand-business-news.com/india/156098-reserve-bank-of-india-maintains-rates-yet-remains-poised-for-cuts-in-q4-2024
- Published: 2024-08-12T17:07:27+07:00
- Author: News Desk

The Reserve Bank of India (RBI) held its policy repo rate and the standing deposit
facility rate at 6.50% and 6.25% respectively for the ninth month at their August
meeting.

**Key View**

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 * The Reserve Bank of India left interest rates unchanged at its August 2024 meeting,
   in line with broad consensus expectations. That said, we still forecast 50bps
   in interest rate cuts from the RBI in FY2024/25, with the first cut coming in
   Q4 2024. 
 * It is unclear whether the RBI will start its easing cycle in October or December,
   as October might be too early considering that inflation edged up slightly in
   June to 5.1% y-o-y, and the Bank remains very focused on its goal of lowering
   inflation given that growth remains robust. 
 * Given that food inflation remains elevated, we see slight upside risks to our
   forecast for cuts to 6.00% this year, but see balanced risks to our forecast 
   for 50bps of cuts to 5.50% in FY2025/26.

 We still expect the Bank to cut the policy repo rate by 50bps to 6.00% by the end
of FY2024/25 (April-March). Similar to the last meeting, the Monetary Policy Committee
voted 4-2 to keep policy unchanged and said it remains ‘focused on withdrawal of
accommodation to ensure that inflation progressively aligns to the target, while
supporting growth’. As was the case in their in June meeting, Governor Shaktikanta
Das mentioned food-related risks to price stability given that they account for 
about 46% of the inflation basket.

The Reserve Bank of India (RBI) has maintained its current interest rates in the
recent monetary policy meeting, a decision reflecting the central bank’s cautious
stance amid fluctuating economic conditions. By holding the rates steady, the RBI
aims to balance growth and inflationary pressures, ensuring stability in a post-
pandemic recovery landscape. This decision signals a commitment to support the economy
while monitoring inflation trends closely.

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Despite the hold, analysts suggest that a cut in the interest rates is likely by
the fourth quarter of 2024. The ongoing assessment of economic indicators, including
inflation levels and GDP growth, indicates that potential cooling in consumer prices
could pave the way for rate reductions. Should economic conditions improve further,
particularly in sectors like manufacturing and services, the RBI might consider 
easing monetary policy to bolster investment and consumption.

As the RBI navigates these complex economic challenges, its strategic rate management
becomes crucial in fostering a conducive environment for growth. A potential rate
cut could invigorate lending and spending, ultimately reinforcing the recovery trajectory.
Stakeholders across sectors will be keenly watching the RBI’s next moves, as they
hold significant implications for the broader economic outlook.
[Read More](https://www.fitchsolutions.com/bmi/banking-financial-services/reserve-bank-india-held-still-track-cut-q4-2024-08-08-2024)