INDF - The Reserve Bank of India Delivers A Hawkish Hold

2024-06-07 05:35:00 ET

Summary

• Was today’s no change to policy and hawkish statement a demonstration of the RBI’s independence as some are suggesting? Or is the backdrop simply not yet conducive to a cut?
• We believe it’s mostly the latter.
• On the inflation front, headline inflation has been in the top half of the RBI's range for quite some time - although much of that is owed to elevated food prices, and core inflation looks much less concerning.

By Robert Carnell

Surprisingly interesting meeting

On paper, this should have been a routine meeting with nothing much to report. India's headline inflation remains stuck in the top half of the Reserve Bank of India's (RBI) inflation target range (2-6%) at 4.8% year-on-year, and first quarter GDP growth for 2024 was another stratospheric 7.7% YoY. Federal Reserve rate cuts still seem a way off, and until this week, Asian FX was on the back foot, and the INR was only holding its ground due to heavy RBI management....

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