Murthy Nagarajan, Head – Fixed Income, Tata Mutual Fund.
RBI kept Policy rates unchanged in the current monetary policy but has revised the CPI inflation projections for the current year to 5.4% from 5.1% in the previous policy, assuming a normal monsoon. RBI governor stated for the first quarter of the next financial year 2024-25 (Q1FY25), CPI is expected to be 5.2%.
Monetary Policy members are looking through high food inflation caused by price rises in vegetables and cereals. RBI expects food inflation to come down when the new kharif crops come in the month of September.
MPC members are taking comfort from Core Inflation coming down by 100 basis points from its peak levels in January 2023. Core inflation which excludes food and energy prices is more closely followed by RBI for policy rate setting.
RBI governor reiterated they want to bring CPI inflation to 4% levels on a sustained basis. This means the withdrawal of accommodation stance will stay and we are in for a long pause in rates.
The ten-year government securities yield is expected to trade in the band of 7.05% to 7.20%.