As was widely expected, the RBI held policy rates steady in its MPC meeting on June 8. It also kept its stance unchanged at “focus on withdrawal of accommodation”. We assess the tone of the policy to be still cautiously hawkish given the strong reiteration of a need to remain vigilant of the evolving inflation outlook. We believe that the central bank will continue to hold the rates at the existing levels in FY24. That said, policy space for future rate hikes remains, should inflation, and more importantly core inflation, surprise on the upside. Furthermore, inflation projection for FY24 was revised down slightly from 5.2% to 5.1% owing to a quicker than expected moderation in price pressures in April (and likely May). Growth projection was kept unchanged at 6.5%.
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