RBI Policy expectations: Steve Brice of Standard Chartered Wealth foresees no change in rates

Steve Brice, Chief Investment Officer of Standard Chartered Wealth expects the Reserve Bank of India (RBI)'s Monetary Policy Committee to leave key interest rates unchanged at its next announcement on February 8.

Brice also foresees the central bank retaining the withdrawal of accommodation stance. “The focus will switch to the policy statement. I think the central bank will want to see further progress on inflation (RBI’s tolerance band for inflation is set between 2 and 6%) coming down before they shift that stance towards easing policy,” he said.

The RBI had left the repo rate unchanged at 6.50% at its last meeting in December. Repo is the rate at which the central bank lends to commercial banks in case they face any shortfall of funds. The current policy stance is aimed at reducing liquidity to control inflation without significantly hindering economic growth.

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Brice noted that the first rate cut from the US Federal Reserve is now likely in June instead of March as there are some concerns that inflation may not come down as quickly as anticipated. He also highlighted the short term inflation upside risks due to the ongoing tensions in the Red Sea.

The US Federal Reserve's Federal Open Market Committee (FOMC) maintained status quo on rates in January. The Fed rate that ranges between 5.25% and 5.5% is at an over two-decade high.

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Brice also shared his outlook on the Chinese market. About $7 trillion of value has been wiped off China and Hong Kong equities since their peaks in 2021 as investors factor in risks ranging from geopolitical tensions to sluggish consumption.

. "We're neutral Chinese equities. We were worried about the fundamentals; the headwinds seem to be significant from the growth, regulatory, and geopolitical sides. But valuations balance that often this extreme pessimism. So, to get a very long term bounce, like six to 12 months past in the Chinese stock market, we need to see further policy actions, inflation bottoming out and recovering," Brice said.

For the entire interview, watch the accompanying video