Key View
- The Reserve Bank of India kept its monetary policy settings unchanged at its December meeting, as was widely expected.
- While a renewed rise in food prices means headline inflation should pick up through year-end, we do not think that will prompt the Bank to hike at its next meeting in February 2024.
- We still expect rate cuts in Q2 2024 – household inflation expectations have begun to fall and the weak demand outlook next year means prices should come off the boil.
The Reserve Bank of India kept its policy repo rate unchanged at 6.50% as we and most other analysts expected. Governor Shaktikanta Das reiterated in his speech that monetary policy has to remain “actively disinflationary” in order to guide inflation back to target, which chimes with our view that rate cuts are still a few months away.
