Global central banks are now in the process of pausing rate increases or intending to be able to pause rate increases, however, it is premature to conclude the end of the global rate hike cycle is imminent given the inflation backdrop still prevailing today. India’s economic recovery has likely remained resilient in the Jan-Mar quarter, but the outlook is uncertain due to a combination of factors including incomplete labour market recovery, unpredictable weather conditions, higher inflation and external headwinds. Meanwhile, providing some comfort to the RBI’s recent decision to pause, the inflation eased in March to 5.7% after remaining above 6% in the preceding two months. From the policy perspective, we remain of the view that the RBI will opt for an extended pause on rates throughout FY24 unless inflation surprises dramatically on the upside.
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