13 March 2024 — On March 12, top economists said India’s headline retail inflation fell in line with market expectations for February. If the inflation eases, the RBI-led monetary policy committee (MPC) may cut the repo rate by the second quarter of FY 2024-25.
While core inflation slowed, inflation was as expected. We anticipate headline inflation to reach 4% from Q2FY25. Strong growth allows the policy to focus on inflation. IDFC First Bank economist Gaura Sen Gupta says the RBI rate decrease cycle should start in August.
Shubhada Rao, Founder of QuantEco Research, said RBI would evaluate the monsoon season before cutting rates. “We expect a neutral 2024 monsoon. Domestic pricing pressure and Fed Reserve activity would determine RBI rate cuts. As the central bank assesses the monsoon, we predict RBI to decrease rates by August MPC. In October MPC, the central bank may decrease rates, Rao added.
Conclusion
Inflation data are released weeks before the RBI’s Monetary Policy Committee (MPC) meets on April 3-5. On February 8, the rate-setting panel maintained the policy repo rate at 6.5 percent for the sixth consecutive meeting. According to the central bank’s latest prediction, CPI inflation will be 5.0 percent this quarter before falling to 4.0 percent in July-September. In the first quarter of 2025, it will grow to 4.7 percent.
