Monetary Policy: Experts See Chances Of A Rate Cut In The Future

The Reserve Bank of India (RBI) on June 8, 2023 kept repo rates unchanged at 6.50%, largely in line with expectations. Repo rates are interest rates charged by the Reserve Bank of India when lending to banks in the country - a tool that helps the country's central bank fight inflation. Meanwhile, rupee remained unchanged after the RBI decided to keep the key policy rate at 6.50%.

Rupee was at 82.5850 to the dollar compared with 82.5950 before policy outcome. BSE Sensex gained 137 points to 63,280 while NSE Nifty rallied 42 points to 18,768 in morning trade. As markets cheered the RBI Monetary policy outcome, this is how experts reacted:

Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares and Stock Brokers on RBI Monetary Policy said, "Today's policy rate pause by the RBI was anticipated. In the wake of a greater-than-anticipated decline in inflation in the recent past, it was anticipated that the monetary policy would shift from a liquidity withdrawal to a neutral stance. However, the MPC has decided to maintain the current stance by a majority vote. This is due to the fact that the demonetization of Rs. 2,000 banknotes has significantly contributed to the recent increase in liquidity. In addition, RBI's projections indicate that RBI's inflation target of 4% will be exceeded each month of the current fiscal year."

Meanwhile, Arun Sharma, AVP, Sales & Marketing, Viceroy Properties stated, "Today's RBI's policy announcement of pause in interest rates after taking a similar stance in the last policy, keeping the repo rate unchanged at 6.5% consecutively indicates that RBI is accelerating the shift towards growth. The total hike since May 2022 at 250 basis points. With inflation easing in various sectors due to the fall in commodity prices, the Indian economy is showing signs of improvement. It is expected that a normal monsoon season would contribute to lower inflation, improve demand, and subsequently lower interest rates."

The MMR real estate market is expected to witness strong purchasing demand from consumers, with infrastructure projects seeing incremental interest in the coming years. Also, reputed developers will continue to see a healthy demand due to their quality construction and timely delivery, added Arun Sharma.

Aalesh Avlani, Founder, Credit Wise Capital said, "With inflation numbers down by 90 bps compared to last month, GDP growth on the upward trend - we all expected the rate to be unchanged. A slightly aggressive stance of reducing the rate would have been appreciated to fuel growth. However, macro policies are aligned with the GDP estimates and that is something to cheer on. One can sense the optimism and it's a good time to build in India."

Sandeep Bagla, CEO Trust Mutual Funds said, "It is a pause, and the possibility of the next move being a cut is far higher than that of a hike. Growth remains resilient and the inflation while moderating now, could rise in the future as labour market remains tight and wage-inflation spiral remains a distinct danger. Australia and Canada have raised rates after a pause. We are not out of the woods yet. Liquidity surplus will have to be reduced as Rs.2000 notes seep into the banking system liquidity. It is quite possible that market yields rise by a few basis points as RBI waits for more economic cues amidst continued global contradictory cues on inflation and growth fronts."