MNI RBI Preview - April 2024: Stubborn Food Inflation Gives Room to Pause

Executive Summary:

• RBI expected to hold rates steady, leaving policy rate at 6.50%
• Little reason for RBI to shift the policy approach this month, or underlying bias of ‘withdrawal of accommodation’
• Broadly, markets do not foresee a rate cut until at least Q3

Full preview including summary of sell-side views found here:

MNIRBIPrevApr24.pdf

Since the last policy meeting inflation outcomes have been close to expectations. Whilst headline inflation is back to the middle of the RBI’s 4-6% target band, core inflation has fallen back to 3.35% y/y in February. This marks fresh lows for the year-on-year series. Given the RBI’s elevated policy rate, an argument can be made for easier policy settings based high real rates.

Still, our sense is that the RBI will display some degree of caution around the inflation backdrop. Food inflation still remains elevated in year-on-year terms at 8.66%. We have been around the 8-10% y/y pace since November last year. This is likely to remain an RBI watch point.