The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting scheduled for June 7, 2024, is set to meet in the immediate backdrop of Lok Sabha election results.
However, analysts see the central bank assessing a potential interest rate cut only in the latter half of 2024, driven by a combination of global and domestic economic indicators.
The factors
Globally, central banks have begun easing interest rates, with notable reductions by central banks in Brazil and Switzerland. The US Federal Reserve and the European Central Bank (ECB) are closely monitored, with expectations adjusting due to recent data shifts impacting rate reversal timelines.
In the US, CPI and PCE inflation metrics have surpassed expectations, delaying market projections for an interest rate cycle reversal from March to possibly September 2024. Meanwhile, the ECB is poised to reconsider its rate stance in June 2024 based on easing inflation trends.
On the domestic front, by the next MPC meeting in June, India’s CPI inflation data for April 2024 will be available, with May’s figures expected shortly after. Additionally, the ECB’s decision on June 6, 2024, and progress updates on the monsoon season, projected to be above normal, will shape the RBI’s considerations.
Of pivotal interest will be the timing of the US interest rate cycle reversal, with continued scrutiny on US CPI, PCE, and GDP growth data by the Indian market.
