RBI Rate cuts off the table As We expect no easing in policy rates Says Morgan Stanley Economists

RBI Repo Rate: There is now little hope of the Reserve Bank of India cutting its policy rates i.e. repo rate during the financial year 2024-25. Economists of Morgan Stanley have said these things in their note. Earlier it was expected that interest rates could be cut after RBI's tolerance band of retail inflation reaches 4 percent. But Morgan Stanley has said in its note that there is no such expectation.

Morgan Stanley economists Upasana Chachra and Bani Gambhir have prepared a note. In their note, these economists wrote, due to improvement in productivity growth, increase in investment rate, inflation rate remaining above 4 percent and high terminal fed funds rate, there seems to be a need for higher interest rates. In such a situation, we believe that RBI will not make any changes in its policy rates in 2024-2025 and the repo rate of RBI will remain at 6.5 percent.

In their note, Morgan Stanley economists wrote that earlier in the US, the possibility of a rate cut in June 2024 was being expressed, but the first rate cut is now possible only in July 2024 and there is a possibility of three interest rate cuts instead of four in 2024. . According to the note, RBI will have to remain cautious due to the high terminal fed funds rate and the strength of the US dollar.

In the note, Morgan Stanley economists said that, we have been continuously saying that the rise in commodity prices, delay in cutting interest rates by the Federal Reserve, strong dollar along with capital expenditure and productivity on the domestic front will lead to an increase in growth. The reason is that RBI can maintain the policy rates at 6.5 percent. These economists said that due to global and domestic reasons, we believe that RBI's policy rates can remain at 6.5 percent.

In fact, after a sharp rise in inflation rate from May 2022 to February 2023, RBI had increased its repo rate from 4 percent to 6.50 percent in six monetary policy meetings, after which due to increase in interest rates, people's EMIs will become expensive. Went.

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