Don’t bet on rate cuts in 2024: Neelkanth Mishra

The Reserve Bank of India (RBI) is unlikely to announce an interest rate cut in 2024, but there may be some easing in liquidity conditions, Axis Bank chief economist Neelkanth Mishra said on Monday.

The Reserve Bank of India (RBI) is unlikely to announce an interest rate cut in 2024, but there may be some easing in liquidity conditions, Axis Bank chief economist Neelkanth Mishra said on Monday.

Mr. Mishra’s assessment differs from that of most economists who expect the RBI to initiate rate cuts in the third quarter of 2024 [between June and August] when it expects retail inflation to average 4%.

“I think headline inflation is likely to stay elevated with continued disruptions to supply of various things… first, it was tomatoes then onions, then potatoes.. now rice and wheat have started to move up, Some of these cycles are going to be very hard to correct in the short term,” Mr. Mishra said.

“I know there’s a consensus building up that the RBI is going to cut rates next year. We are not in that camp, we don’t think that RBI’s Monetary Policy Committee (MPC) will find an opportunity to cut repo rates next year. This is despite the fact that consensus expectations are that global rates will fall,” he said, noting that there’s no direct link between the Indian rates and global rates as India’s capital account is not fully open yet.

The MPC’s mandate is domestic inflation, which may not ease to a level where they can start cutting rates. Moreover, the fact that growth has delivered a positive surprise to the central bank means that the propensity to cut interest rates is not there, he added.