RBI MPC policy review: Indranil Pan, Chief Economist, YES BANK

7 Jun 2024 , 12:36 PM

Even as one more member has now turned in favour of a stance change and a rate change, we do not see the RBI in any hurry to move towards a pivot. The governor points out to the fact that there continues to be risks from food inflation and the summer price changes are visible on the backdrop of a shallow winter price drop. In this context, the RBI would watch out for the pulses and vegetables prices that have seen a recent uptick in prices. There are come cautionary statements for the core inflation too. It was pointed out that the early results from its enterprise surveys do point towards firms expecting the selling prices to stay firm. Importantly, for the RBI, the 4% inflation target to be reached on a durable basis remains sacrosanct.

The comment that comes to the fore is his mention of the fact that the currently expected 3.8% average inflation for Q2 FY25 is likely to be a one-off and inflation is expected to move higher beyond this point. Overall, this policy continues to echo similar sentiments as in the previous policy – that the RBI is unlikely to make any haste in its decision to pivot and will remain driven by the domestic growth-inflation mix in determining the timing of its policy move. In our opinion, with growth expected to remain firm, the last phase of dis-inflation towards the 4% target remains arduous and hence the RBI would be willing to bide its time. We see a shallow rate cut this fiscal, probably starting in December 2024.