Introduction to RBI’s Rate Cut Prediction
Bank of America (BofA) forecasts a potential rate cut by the Reserve Bank of India (RBI) in October 2024. This projection draws on the latest Consumer Price Index (CPI) and Industrial Production (IIP) data, signaling subtle shifts in India’s economic conditions.
CPI Analysis
India’s CPI slightly decreased to 4.83% year-over-year in April, which was below the expected 4.9%. This result was influenced by minor increases in food prices, particularly in cereals, fruits, and oils. Additionally, falling prices in fuel and light contributed to the overall reduction in CPI.
Inflation Trends
Core inflation, which excludes food and fuel, fell to 3.22% from the previous month. The even more specific core-core inflation, excluding items like petrol, diesel, and gold, decreased to 3.04%. Despite this, BofA suggests that CPI could climb back to around 4.9% in May.
Industrial Production and Its Impact on the 2024 RBI Rate Decision
Growth in Industrial Production slowed down to 4.9% in March year-over-year, with significant slowdowns in the mining sector. Conversely, slight improvements were noted in manufacturing and electricity sectors, illustrating the complexity of the industrial environment.
RBI Monetary Policy Forecast
\According to BofA, the RBI’s Monetary Policy Committee (MPC) is likely to hold off on rate cuts until October 2024, expecting inflation to stabilize at the RBI’s 4% target. This forecast reflects a calculated approach to monetary easing.
Guidance for Investors Considering the RBI Rate Changes
During this period of economic adjustment, BofA recommends that investors reassess their portfolios to align with the anticipated policy shifts by the RBI. An offer on InvestingPro, available at a significant discount, provides additional resources to refine investment strategies.
