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MOSL: ECOSCOPE-RBI keeps policy rates on hold; Cuts inflation forecasts for FY19

ECOSCOPE: RBI keeps policy rates on hold; Cuts inflation forecasts for FY19

 

• The Monetary Policy Committee (MPC) maintained status quo in its first bi-monthly monetary policy meeting for FY19 held on 5th April 2018. This decision was in line with market consensus and taken with a majority of 5-1 votes.
• The RBI revised down its 4QFY18 inflation projection to 4.5% from 5.1% earlier, implying inflation of 3.9%-4% in March 2018, in line with our forecast of 4%. It also cut its inflation forecasts for 1HFY19/2HFY19 to 4.7%-5.1%/4.4% from 5.1%-5.6%/4.5% earlier, while maintaining its GDP growth projections for FY19 at 7.4%. It, however, stressed that the risks to inflation were tilted toward the upside.
• We believe that while inflation could be even lower than the RBI's projections in FY19, real GDP growth will still be capped at 7%, higher than in FY18 but lower than the RBI's forecasts. Consequently, we do not expect any interest rate action from the central bank in 2018.