MOSL: ECOSCOPE-Expect no more rate hikes in 2018; RBI’s economic projections broadly unchanged
ECOSCOPE: Expect no more rate hikes in 2018; RBI’s economic projections broadly unchanged
- As per our expectations, the monetary policy committee (MPC) hiked policy rates by 25bp in its monetary policy meeting held today. The decision to hike rates was taken with 5-1 majority – Dr R Dholakia disapproved.
- Notwithstanding the government’s decision to fix minimum support prices (MSPs) for all kharif crops at at-least 150% of the cost of production, the RBI has kept its FY19 inflation forecasts broadly unchanged. Real GDP growth forecasts are also retained at 7.4% for FY19.
- Although the RBI highlighted multiple risks to inflation and growth, the risks to both forecasts are evenly balanced.
- We believe that both inflation and real GDP growth in FY19 will be lower than the RBI’s forecasts. Further, as we move closer to the elections, the uncertainty will also increase. We don’t expect further rate hikes in the remainder of FY19.
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