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<ul><li>The <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword>’s <keyword id="20104157" type="General" weightage="20" keywordseo="monetary-policy" source="keywords">monetary policy</keyword> meeting is set to begin today.</li><li>The central bank will announce the outcome of the <keyword id="22684891" type="General" weightage="20" keywordseo="MPC-meeting" source="keywords">MPC meeting</keyword> on October 9.</li><li><keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword> has kept the <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword> unchanged for the last nine consecutive meetings.</li></ul>The Reserve Bank of India (RBI) is set to begin its three-day monetary policy meeting on Monday and will run from October 7 to October 9. All eyes are on the outcome, as the central bank has kept the repo rate unchanged for the last nine consecutive meetings. The repo rate, currently at 6.50%, has remained steady since the RBI adopted a cautious stance to balance inflation control and economic growth. The Monetary Policy Committee (MPC), headed by RBI Governor <keyword id="19913110" type="General" weightage="20" keywordseo="Shaktikanta-Das" source="keywords">Shaktikanta Das</keyword>, is expected to weigh key factors like inflationary trends, global economic uncertainties, and domestic growth prospects. Inflation continues to be a challenge, particularly in food and fuel prices, which saw a surge earlier this year. As per the data from the Ministry of Statistics &amp; Programme Implementation, though the All India Consumer Price inflation in August was 3.65%, which is under the RBI target band the food inflation stands at 5.65% and it remains above the RBI's medium-term target of 4%. Despite these inflationary pressures, the RBI has opted for a status quo on the repo rate, primarily to support economic recovery post-pandemic. However, there are rising concerns that external factors, like the rising global crude oil prices and tensions in West Asia, may compel the RBI to reconsider its current stance. Earlier this month the central government appointed three new members to the monetary policy committee. The MPC comprises three members from the RBI and three external members appointed by the Central Government. The newly reconstituted committee consists of the Governor of the Reserve Bank of India as the Chairperson, ex officio; the Deputy Governor of the Reserve Bank of India, in charge of monetary policy--Member, ex officio, and one officer of the Reserve Bank of India, nominated by the Central Board -- Member, ex officio. The new external members included in the MPC are Professor Ram Singh, Director, Delhi School of Economics, University of Delhi, Saugata Bhattacharya, economist; and Dr. Nagesh Kumar, Director and Chief Executive, Institute for Studies in Industrial Development. Market participants and analysts are closely monitoring this meeting for any forward guidance on future rate actions. Many believe the central bank will continue its wait-and-watch approach, but a surprise rate hike cannot be entirely ruled out. On September 18, the <keyword id="19901377" type="General" weightage="20" keywordseo="US-Federal-Reserve" source="keywords">US Federal Reserve</keyword> announced a steep 50 basis points interest cut in its review meeting. US Fed announced the rate cuts after holding interest rates steady for eight straight meetings. The outcome of the MPC meeting will be announced on October 9 and will set the tone for future monetary policies amid the changing global economic landscape. The Reserve Bank of India (RBI) will commence its three-day monetary policy meeting on Monday, October 7th, and continue until October 9th. The result of this meeting is eagerly anticipated, as the central bank has maintained a steady repo rate for the past nine consecutive meetings. The repo rate has remained at 6.50% since the RBI adopted a cautious approach to balance inflation control and economic growth. The Monetary Policy Committee (MPC), led by RBI Governor Shaktikanta Das, will consider various factors, including inflationary trends, global economic uncertainties, and domestic growth prospects. Inflation remains a challenge, particularly in food and fuel prices, which surged earlier this year. According to data from the Ministry of Statistics &amp; Programme Implementation, All India Consumer Price inflation in August was 3.65%, within the RBI's target band, however, food inflation stands at 5.65%, exceeding the RBI's medium-term target of 4%. Despite inflationary pressures, the RBI has opted to maintain the repo rate to support economic recovery post-pandemic. Nonetheless, rising concerns about external factors, such as increasing global crude oil prices due to tensions in West Asia, may prompt the RBI to reassess its current stance. Earlier this month, the central government appointed three new members to the monetary policy committee. The MPC consists of three members from the RBI and three external members appointed by the Central Government. It is worth noting that on September 18, the US Federal Reserve announced a substantial 50 basis points interest rate cut in its review meeting, reversing its previous stance of holding rates steady for eight consecutive meetings. With inputs from ANI. SEE ALSO: <a href="https://www.businessinsider.in/business/auto/news/september-auto-sales-automakers-report-a-decline-mahindra-and-mahindra-overtakes-tata-motors/articleshow/113925972.cms">September Auto sales – Automakers report a decline, Mahindra and Mahindra overtakes Tata Motors</a> <a href="https://www.businessinsider.in/business/auto/news/ola-electric-continues-to-lose-market-share-as-bajaj-auto-and-tvs-motor-gain/articleshow/113900252.cms">Ola Electric continues to lose market share as Bajaj Auto and TVS Motor gain</a> <a href="https://www.businessinsider.in/business/telecom/news/airtel-is-using-ai-powered-technology-to-block-spam-calls-and-messages/articleshow/113691942.cms">Airtel is using AI-powered technology to block spam calls and messages</a>

RBI's monetary policy committee meeting begins today, announcement on October 9

Days after Trump won his way to the White House, becoming the 47th President of the United States, the US Federal Reserve slashed the interest rates by 25 basis points, bringing them within the range of 4.5-4.75%. This is the second time this year that the Fed has lowered the interest rates, after cutting them down by 50 basis points in September 2024. u Fed chair Jerome Powell noted that monetary policy remains tight as inflation remains elevated at 2.4% as of September 2024, slightly above the 2% mark set by the commission. However, the Fed remained optimistic about the current state of the economy. "The Committee seeks to achieve maximum employment and inflation at 2% over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate," the FOMC (Federal Open Market Committee) noted in its press release. The rate cut was along widely anticipated lines, although experts were wary of the Fed's way ahead, given that Donald Trump has been elected as the US President. In the past, he has, on multiple occasions, expressed his desire to yield greater influence on the Fed, apart from publicly criticizing Powell. However, Powell continued to stand his ground, noting that Trump cannot legally sack him. He believed in keeping the Fed independent, at least until his tenure as governor ends in 2028. He highlighted that even if he is explicitly asked by Trump to quit, he won't do so. <h2>Trump's regime to inch up inflation?</h2> Trump's electoral promises, if translated into policies, could spell disaster for the Fed's effort to curtail inflation. Reportedly, Trump has promised to levy aggressive tariffs against US trading partners, particularly China, and even extend his 2017 tax cuts. This could mean higher levels of the federal deficit, which would push up prices, wages, and hence, inflation, even as the Fed tries to consistently bring it under control. Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities, notes that it wasn't a surprise when the US Fed cut interest rates by 25 basis points (bps) to 4.75%. The Fed had given enough clues, and the market too had anticipated these rate cuts. "However, what was surprising was how the <keyword id="23863852" type="General" weightage="20" keywordseo="US-10-year-bond-yields" source="keywords">US 10-year bond yields</keyword> moved over the last one and a half months, which have been rising relentlessly from 3.6% to almost 4.5% despite the 50 bps cut in the last Fed meeting. It seems that the market is anticipating slower rate cuts going ahead, and maybe there are even chances of inflation rising. The bond yields have cooled off and slipped below the 4.335% mark. This should be bullish for emerging markets like India," he added.

US Fed cuts interest rates by 25 bps, Powell notes Trump's victory to have no impact on policy decisions

Mumbai: The Reserve Bank is unlikely to cut the benchmark <keyword id="20071327" type="General" weightage="20" keywordseo="interest-rate" source="keywords">interest rate</keyword> in its forthcoming bi-monthly monetary policy review later in the week as <keyword id="19999652" type="General" weightage="20" keywordseo="retail-inflation" source="keywords">retail inflation</keyword> is still a cause of concern, and there is a possibility of the Middle East crisis deteriorating further, impacting crude oil and commodity prices, say experts. Earlier this month, the government reconstituted the Reserve Bank's rate-setting panel -- <keyword id="19913109" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword> (MPC). The reconstituted panel, with three newly appointed external members, will commence its maiden meeting on Monday. MPC Chairman RBI Governor Shaktikanta Das will reveal the outcome of the three-day discussion on Wednesday (October 9). The <keyword id="19899810" type="General" weightage="100" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> (RBI) has kept the repo or short-term lending rate unchanged at 6.5 per cent since February 2023, and experts think some easing could only be possible in December. The government has tasked the central bank to ensure that Consumer Price Index (CPI) based retail inflation remains at 4 per cent with a margin of 2 per cent on either side. In the current context, experts feel that the RBI may not follow the US Federal Reserve, which lowered the benchmark rates by 50 basis points, and the central banks of some developed nations, which have reduced the interest rates. "We do not expect any change in the <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword> or stance by MPC. The reason is that inflation for September and October will be above 5 per cent, and the present low inflation is due to the base effect. Besides, core inflation is inching upwards," said Madan Sabnavis, Chief Economist, Bank of Baroda. Further, the recent Iran-Israel imbroglio can intensify, and there is uncertainty here, he said. "Hence, the status quo is the most likely option even for new members. Inflation forecast may be lowered by 10-20 bps and no change in GDP forecast likely," said Sabnavis. The central bank last hiked the repo rate to 6.5 per cent in February 2023 and since then, it has held the rate at the same level. Icra Chief Economist Aditi Nayar said that given the undershooting in the initial first quarter GDP growth relative to the MPC's forecast and the likely sizeable undershooting in the second quarter CPI inflation print as well, "we believe a stance change to neutral may be appropriate in the October 2024 policy review". This could be followed by a shallow rate-cutting cycle of 25 bps each in December 2024 and February 2025, she added. "The abundant monsoon offers some insurance for crop inflation. The impact of global political developments and geopolitical uncertainty on the growth inflation dynamics remains a risk," Nayar added. An HSBC report said three developments stand out -- softer growth numbers have trickled in recently, inflation has been falling, and the external environment has moved from rate hikes to cuts. "We believe the RBI doesn't gain from waiting any longer. We think it will change its stance from a hawkish 'withdrawal of accommodation' to 'neutral' in the upcoming 9 October policy meeting, followed by repo rate cuts of 25 bps each in the December and February meetings, taking the repo rate to 6 per cent," the report said. The RBI kept the repo rate unchanged at 6.5 per cent in its August bi-monthly review amid risks from higher food inflation. This was the ninth consecutive MPC meeting, which decided to maintain the status quo on the rate front. Pradeep Aggarwal, founder and chairman, Signature Global (India) Limited, said while the real estate industry, developer community, and homebuyers are hoping for an interest rate cut in the upcoming monetary policy review, the RBI is likely to hold on to the interest rate cuts for the tenth consecutive time. "The apex bank still seems uncomfortable with the overall retail inflation scenario, particularly food inflation. As such, it is expected to maintain the status quo. The recent interest rate cut by the US Federal Reserve has ignited similar hopes even in India, but the domestic scenario is very different," he added. SBM Bank India Head Treasury Mandar Pitale believed that the MPC has persistently advocated a restrictive policy until inflation aligns durably towards the 4 per cent target. "With the unfavourable base effect taking the next couple of CPI prints near 5 per cent plus or minus, it will pose a major challenge for MPC to start easing from the October meeting," Pitale said, adding that the MPC is also expected to deliberate upon the global factors like growth-inflation behaviour in developed economies. The government has appointed Ram Singh, Saugata Bhattacharya, and Nagesh Kumar as external members of the MPC. They have replaced Ashima Goyal, Shashanka Bhide, and Jayanth R Varma. Apart from the Governor, the other internal members are the RBI Deputy Governor in charge of monetary policy Michael Debabrata Patra and the Executive Director monetary policy department of RBI Rajiv Ranjan. In an off-cycle meeting in May 2022, the MPC raised the policy rate by 40 basis points and it was followed by rate hikes of varying sizes, in the subsequent meetings till February 2023. The repo rate was raised by 250 basis points cumulatively between May 2022 and February 2023.

Status-quo on interest rate likely, say experts ahead of RBI's policy review

<ul><li>The <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> will conclude the three-day <keyword id="19913109" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword> (<keyword id="19918491" type="General" weightage="20" keywordseo="MPC" source="keywords">MPC</keyword>) meeting today.</li><li>The central bank is expected to announce its decision on policy rates.</li><li>The <keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword> has maintained the <keyword id="20094323" type="General" weightage="100" keywordseo="repo-rate" source="keywords">repo rate</keyword> at 6.50% for the past nine meetings.</li></ul>The Reserve Bank of India (RBI) is set to conclude the three-day Monetary Policy Committee (MPC) meeting today, with Governor <keyword id="19913110" type="General" weightage="20" keywordseo="Shaktikanta-Das" source="keywords">Shaktikanta Das</keyword> expected to announce the central bank's decision on policy rates. The meeting, which <a href="https://www.businessinsider.in/finance/news/rbis-monetary-policy-committee-meeting-begins-today-announcement-on-october-9/articleshow/113999887.cms">began</a> on October 7, has garnered significant attention, as the RBI has maintained the repo rate at 6.50% for the past nine meetings. The repo rate has remained steady since the RBI adopted a cautious stance to balance inflation control and <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword>. Key factors that the MPC is weighing include persistent inflationary pressures, particularly in food prices, as well as global economic uncertainties. According to data from the Ministry of Statistics &amp; Programme Implementation, while All India Consumer Price Index (CPI) inflation moderated to 3.65% in August--within the RBI's target band of 2-6%. <keyword id="19999654" type="General" weightage="20" keywordseo="food-inflation" source="keywords">Food inflation</keyword> remains elevated at 5.65%, above the central bank's medium-term target of 4%. This, coupled with rising global crude oil prices due to geopolitical tensions in West Asia, has intensified concerns over inflation. Despite these challenges, the RBI has so far opted for a status quo on the repo rate, aiming to foster economic recovery after the pandemic. However, today's announcement will be closely watched to see if the central bank shifts its stance, especially given the external pressures and uncertainties surrounding global markets. Economists, however, have noted that the RBI will not make any changes in its policy stance before December. "With the focus on taming headline inflation, the RBI is likely to hold the rates although the core inflation is within the limit. It is possible the RBI may shift to the neutral stand" said M Govind Rao, Member, of the Fourteenth Finance Commission and former Director, of the National Institute of Public Finance and Policy. On September 18, the US Federal Reserve announced a steep 50 basis points interest cut in its review meeting. US Fed announced the rate cuts after holding interest rates steady for eight straight meetings. "In this overarching macroeconomic setting of heightened geopolitical tensions, core inflation inching upwards, oil price volatility, and high food inflation, we anticipate a change in the RBI's policy stance from "withdrawal of accommodation" to "neutral" at its forthcoming MPC meeting on October 9, 2024. However, we do not see any rate action coming and the benchmark interest rates may not undergo any change" said Manoranjan Sharma, Chief Economist, Infomerics Ratings. Earlier this month the central government appointed three new members to the monetary policy committee. The MPC comprises three members from the RBI and three external members appointed by the Central Government. With inputs from ANI. SEE ALSO: <a href="https://www.businessinsider.in/business/auto/news/byd-emax-7-electric-mpv-launched-in-india-starting-at-26-9-lakh/slidelist/114046121.cms">BYD eMax 7 electric MPV launched in India starting at ₹26.9 lakh</a> <a href="https://www.businessinsider.in/personal-finance/news/heres-how-a-reddit-user-was-able-to-get-an-iphone-16-at-under-27000/articleshow/114035179.cms">Here’s how a Reddit user was able to get an iPhone 16 at under ₹27,000</a> <a href="https://www.businessinsider.in/stock-market/news/hyundai-swiggy-ather-upcoming-large-ipos-in-india/slidelist/114014140.cms">Hyundai To Swiggy: Everyone wants to cash in on the IPO bonanza</a>

RBI MPC announcement today: Rates unlikely to change, RBI may change stance to neutral

The Reserve Bank is unlikely to ease the benchmark policy rate from 6.5% during 2024, given the persisting uncertainty over <keyword id="19999654" type="General" weightage="20" keywordseo="food-inflation" source="keywords">food inflation</keyword>, State Bank of India (<keyword id="19898108" type="General" weightage="20" keywordseo="SBI" source="keywords">SBI</keyword>) chairman C S Setty has recently said. The US Federal Reserve's first cut in <keyword id="20071327" type="General" weightage="20" keywordseo="interest-rate" source="keywords">interest rate</keyword>s in more than four years happened today, triggering central banks in other economies to follow suit. The Fed trimmed the interest rates by 50 basis point trim to its target interest rate range to 4.75-5%. "On the rate front, a lot of central banks are taking independent calls. While Fed rate cut would influence everyone, <keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword> would be mindful of the food inflation before taking a call on interest rate cut," Setty, who recently took over the reins of the bank, was noted as saying. "Our view is also that the rate cut during the current calendar year may not happen. Probably, we may have to wait for Q4 (January-March 2025) unless there is a good improvement in terms of food inflation," he added. Notably, RBIs <keyword id="19913109" type="General" weightage="100" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword> (MPC), headed by RBI Governor Shaktikanta Das is scheduled to meet next month, between October 7-9 and take a call on interest rate. The committee will largely take <keyword id="19999652" type="General" weightage="20" keywordseo="retail-inflation" source="keywords">retail inflation</keyword>, which inched to 3.65% in August, up from 3.54% in July, into account for making rate-related decisions On the other hand, India's wholesale price index (WPI) eased to 1.31% on an annual basis, which is also a 4-month low, down from 2.04% in July. The data, released recently by the government, also highlighted the stickiness of food price inflation, which stood largely undeterred at 3.11% in August, as compared to 3.45% in July. Although WPI rates do not directly impact RBIs decision making, it does affect the retail inflation rates, although it takes time to reflect the same. Says Rahul Agrawal, Senior Economist at ICRA Ltd, “The <keyword id="20198768" type="General" weightage="20" keywordseo="WPI-inflation" source="keywords">WPI inflation</keyword> eased to a four-month low in August 2024, with the fuel and power, core (non-food manufacturing), and crude petroleum and natural gas sub-groups together pulling down the headline WPI print by as much as 70 bps in the month vis-à-vis July 2024. The core WPI inflation dipped to 0.7% in August 2024 from 1.2% in July 2024, amidst a continued softening in global commodity prices. "While prices of most food items have eased further on a month-on-month basis in September 2024, an adverse base would push up the YoY inflation prints for the primary food articles category significantly in the ongoing month, exerting upward pressure to the headline WPI inflation print for September 2024", said Agrawal. The price of the Indian basket of crude oil has averaged 6.0% lower in September 2024 on a sequential basis, touching the lowest levels in 33 months, which would also help contain the uptick in the headline WPI inflation print in the month. We anticipate WPI to touch the 2.0% in September 2024 from 1.3% in August 2024", he continued. Amongst the food articles whose prices dipped during the month were cereals (8.44%), paddy (9.12%), pulses (18.57%) and onions (65.75%), it did little to tame inflation, which continued to stay put in double digits. On the other hand, prices of potato (77.96%) and fruits (16.7%) inched up. The dip in WPI was largely led by slowdown in prices of manufactured food products (3.61%), beverages (1.9%), pharmaceuticals (1.97%) and petrol (4.23%). "While there may not be a one-to-one correspondence between the WPI and the CPI data because of the items, size, number, and relative weights assigned, the CPI data will also down-trend in sync with the RBI’s medium-term target of 4 % for the second time in nearly five years. However high food prices will induce the RBI to be wary", notes Manoranjan Sharma, Chief Economist, Infomerics Ratings.

RBI unlikely to cut interest rate in 2024, food inflation to be deciding factor, says SBI chief Setty

New Delhi: India's Consumer Price Index (<keyword id="20468215" type="General" weightage="20" keywordseo="CPI" source="keywords">CPI</keyword>) <keyword id="19895000" type="General" weightage="100" keywordseo="inflation" source="keywords">inflation</keyword> dropped to 3.54 per cent in July 2024, its lowest in nearly five years, largely driven by a decline in <keyword id="20028256" type="General" weightage="20" keywordseo="vegetable" source="keywords">vegetable</keyword> <keyword id="19900607" type="General" weightage="20" keywordseo="prices" source="keywords">prices</keyword>. However, despite this positive development, the <keyword id="19934368" type="General" weightage="20" keywordseo="State-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="State Bank of India" meta.hostid="261" meta.entityid="State Bank of India">State Bank of India</keyword> (<keyword id="19898108" type="General" weightage="20" keywordseo="SBI" source="keywords">SBI</keyword>) has cautioned that the path forward may be challenging, according to the SBI research report. The dramatic reduction in vegetable inflation, which plummeted from 29.3 per cent in June to a mere 6.8 per cent in July, played a crucial role in achieving this multi-year low. The weighted contribution of vegetables to the overall CPI also shrank from 1.77 per cent in June to 0.55 per cent in July, underscoring their impact on the headline inflation figure. Additionally, the prices of fruits and fuel showed signs of moderation, contributing further to easing inflationary pressures. However, this broad-based relief was tempered by a slight uptick in core CPI inflation, which excludes food and fuel prices. The SBI's latest report highlights that the once-dominant "Follow the Fed" mantra appears to be waning, with an increasing number of central banks prioritizing domestic economic conditions over synchronizing with U.S. rate decisions, signaling a shift in global <keyword id="20104157" type="General" weightage="20" keywordseo="monetary-policy" source="keywords">monetary policy</keyword> dynamics. This decline in CPI marks the first time in half a decade that CPI inflation has dipped below the Reserve Bank of India's (RBI) target of 4 per cent, a feat largely attributed to a steep fall in vegetable prices. Core CPI rose from 3.12 per cent in June to 3.30 per cent in July, driven primarily by an increase in mobile tariffs. Notably, the transport and communication segment saw inflation rise sharply from 0.97 per cent in June to 2.48 per cent in July, indicating sector-specific pressures. The moderation in food inflation, which stood at 5.06 per cent year-on-year in July, was significantly influenced by a higher base effect. Despite this, concerns persist over the uneven distribution of monsoon rainfall, particularly in key foodgrain-producing states experiencing deficient precipitation. With La Nina conditions gaining strength, the possibility of excessive rainfall in August and September looms large, raising fears of crop damage that could reignite food price inflation. Looking ahead, inflationary pressures may persist, potentially exceeding the RBI's forecast of 4.5 per cent for FY25. The domestic growth momentum remains robust, with GDP expected to surpass 7 per cent in Q1 FY25. However, geopolitical uncertainties continue to pose risks to the growth outlook. The RBI, maintaining a tight liquidity stance to control inflation, has deferred potential rate cuts to December 2024 or February 2025. State-wise analysis reveals that the majority of states recorded CPI inflation rates below the national average, with only six out of 22 states experiencing higher-than-average inflation. Despite this, significant rural-urban inflation differentials were observed, with most states seeing higher inflation in rural areas compared to urban counterparts. Only four states reported higher urban inflation. Historically, when the U.S. Federal Reserve adjusts its interest rates, global capital flows are impacted, prompting central banks in emerging markets to follow suit. However, while the Fed's recent rate hike cycle (2022-2023) saw a synchronized global response, the current rate-cutting phase is proving to be less coordinated. Central banks in countries like China, Chile, Brazil, Mexico, the UK, Canada, and the European Central Bank have already begun reducing rates, while the Fed is expected to initiate cuts in September 2024. India's Index of Industrial Production (IIP) grew by 4.2 per cent in June 2024, down from a revised 6.2 per cent in May. The mining sector led the growth with a 10.3 per cent increase, followed by electricity at 8.6 per cent and manufacturing at 2.6 per cent. For the April-June 2024 period, industrial growth stood at 5.2 per cent, compared to 4.7 per cent in the same period the previous year. As India navigates the delicate balance between growth and inflation, the coming months will be critical in shaping the country's economic trajectory, especially with potential global shifts in monetary policy and the evolving monsoon season.

CPI inflation drops to lowest in five years but road ahead could be bumpy: SBI Report

In April, the <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> (<keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword>) governor Shaktikanta Das referred to <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">inflation</keyword> as the ‘elephant in the room’. He said, “The elephant has now gone out for a walk and appears to be returning to the forest. We would like the elephant to return to the forest and remain there on a durable basis… Elephant moves slowly, and last mile inflation tends to be sticky.” On Friday, the Indian government data showed that the year-on-year inflation rate based on the Consumer Price Index (<keyword id="20468215" type="General" weightage="20" keywordseo="CPI" source="keywords">CPI</keyword>) for June 2024 stood at 5.08 per cent — rising from 4.75% last month. This was the first time the headline inflation had risen since December 2023! Looks like the elephant decided to stop and look back on its way to the forest. The question remains, what’s next — will it return to the forest or return to the room to haunt us again? <h2>Food price inflation at a record high</h2> The major driver for the higher inflation figures this month has been the rising <keyword id="19960157" type="General" weightage="20" keywordseo="food-prices" source="keywords">food prices</keyword> across India. In fact, food price inflation almost doubled year-on-year in June, rising to 8.36 per cent last month compared to 4.63 per cent in June 2023. Inflation in the food basket was 9.36 per cent in June, up from 8.69 per cent in May, according to the data of the National Statistical Office (NSO). Government data showed that <keyword id="513422" type="General" weightage="20" keywordseo="retail-inflation" source="Orion">retail inflation</keyword> for all food segments, including cereal, meat, eggs, milk, oils, fruits, vegetables, pulses, sugar, spices, prepared snacks, and sweets, increased month-on-month. This was the main cause for retail inflation hardening in June, diverging from the previous months' moderation. While the inflation rate based on the all-India CPI for June 2024 stood at 5.08%, rural and urban inflation rates also spiked to 5.66 per cent and 4.39 per cent, respectively. “Barring the food basket, inflation is indicating signs of bottoming out broadly across the non-food categories, also seen in the inflation in the core categories averaging at 3.5% in the last six months. A stable monsoon will play an important role in stabilising food prices and inflation levels over the next few months,” said Vivek Rathi, National Director Research, Knight Frank India. In May, annual retail inflation was at a 12-month low of 4.75%, slightly down from April's 4.83%. In December last year, retail inflation stood at 5.7 % and had been moderating until June. On the other hand, the US CPI rose only 3% on an annual basis in June versus expectations of 3.2%. Month-over-month, the US CPI declined 0.1%, on expectations for a 0.1% rise. <h2>There goes the chance of an early rate cut?</h2> While European central banks started to cut interest rates last month, hopes of such policy moves seem to have been derailed by these inflation figures. Indian central bank, RBI, has remained cautiously focused on inflation as the growth prospects remained robust. It has been waiting for the final phase of disinflation to materialise before considering rate cuts. The situation, however, does seem rather peculiar — as long as inflation does not align with the central bank's 4% target, the interest rates may remain rather high. However, the current economic environment is not gloomy at all, characterized by a robust GDP growth rate, estimated at 8.2% for 2023-24. Hence, the RBI adopts a wait-and-see approach. And the wait is likely to continue a little while longer. This year, food prices have become a significant issue for policymakers in India, and the RBI governor pinned his hopes on a good monsoon season to alleviate the food price inflation concerns. So far, the monsoon has stood up to our expectations, yet the food prices have remained stubbornly high, mainly due to extended heat wave conditions in June. "The CPI inflation came marginally higher than our expectations. While the <keyword id="67286" type="General" weightage="100" keywordseo="food-inflation" source="Orion">food inflation</keyword> risks will continue to dominate in the near term, we expect better sowing patterns and spatial distribution of rains to eventually ease the price pressures beyond these volatile months. Having said that, the central bank will be in no hurry to ease <keyword id="20104157" type="General" weightage="20" keywordseo="monetary-policy" source="keywords">monetary policy</keyword> given the headroom from robust growth in the backdrop of near-term inflation risks," said Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank. India's retail inflation remains within the Reserve Bank of India's (RBI) comfort range of 2-6% but exceeds the ideal 4% scenario. While inflation is a global concern, India has so far managed its inflation trajectory relatively well. Since May 2022, the RBI has raised the repo rate by 250 basis points cumulatively to combat inflation. However, over the last eight policy cycles, the central bank has kept the rates consistent at 6.5%. The next monetary policy meeting of the RBI is scheduled for early August. And with the higher-than-expected inflation data, the central bank is likely to keep the rate unchanged next month as well for the ninth consecutive month. However, hopes are still alive for a rate cut towards the end of the year. "We are not ruling out a stance change in October 2024 and a 25 bps rate cut each in December 2024 and February 2025, followed by an extended pause, if the food inflation outlook turns decidedly favourable on the back of a normal magnitude and favourable distribution of rainfall in the rest of the monsoon season, and there are no other shocks, either global or domestic," said Aditi Nayar, Chief Economist at ICRA. (With inputs from ANI and PTI) <div type="Article" hostid="261" msid="110784179" title="Monetary Policy Committee keeps repo rate unchanged at 6.5%, confirms RBI governor Shaktikanta Das" mstype="2" mssubtype="0"><payload><![CDATA[seealso]]></payload></div> <div type="Article" hostid="261" msid="110788776" title="RBI retains inflation projection for FY25 at 4.5%" mstype="2" mssubtype="0"><payload><![CDATA[seealso]]></payload></div>

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