The 3-day meeting of the Reserve Bank of India’s Monetary Policy Committee begins: The RBI Monetary Policy Committee (RBI MPC), headed by RBI Governor Shaktikanta Das, on Tuesday began three-day deliberations as retail inflation remained close to the higher levels of 2019, Short-term loan rates will remain as they are. The central bank’s comfort zone.
The Reserve Bank has held the short-term lending rate, or repo rate, steady at 6.5% for nearly a year. The benchmark interest rate was last raised in February 2023 from 6.25% to 6.5% to curb inflation driven mainly by global developments.
Retail inflation in the current financial year has declined after peaking at 7.44% in July 2023, but remains high at 5.69% in December 2023, although still within the Reserve Bank’s comfort zone of 4-6%.
Governor Das will announce the decision of the Monetary Policy Committee (MPC) on Thursday (February 8) morning.
The State Bank of India (SBI) said in a report that it expects the Reserve Bank of India to continue to adopt a pause stance on upcoming policies.
“Strong U.S. non-farm payrolls data and wages appear to have pushed back market expectations for a quick rate cut,” it said, adding that a first rate cut could come in the June-August period which “looks best” now. bet”.
The state-owned bank also expects the Reserve Bank of India to continue to withdraw its easing stance.
SBI further said that it expects the CPI to rise by around 5.4% in the 2023-24 fiscal year and 4.6% to 4.8% in the next fiscal year (2024-25).
The government has tasked the central bank to ensure that retail inflation based on the Consumer Price Index (CPI) remains at 4%, with a margin of 2% on either side.
On policy expectations, Andromeda Loans co-CEO Raoul Kapoor said the RBI is expected to keep interest rates unchanged.
“The decision was mainly influenced by the ongoing challenge of high retail inflation, which remains uncomfortably close to the RBI’s upper limit of 6 per cent inflation target. The current inflationary pressures require a cautious approach,” he said.
Overall, while there may not be an immediate rate cut, the prospect of a supportive monetary policy stance in the near term offers a glimmer of hope, Kapoor added.
The Monetary Policy Committee is responsible for deciding the policy repo rate to achieve the inflation target, taking into account the growth target.
At its off-cycle meeting in May 2022, the Monetary Policy Committee raised the policy rate by 40 basis points, followed by hikes of varying magnitudes in each of the five meetings until February 2023. The repo rate was increased by 250 basis points cumulatively between May 2022 and February 2023.
The Monetary Policy Committee consists of three external members and three RBI officials.
External members of the team include Shashanka Bhide, Ashima Goyal and Jayanth R Varma. Apart from Governor Das, other RBI officials on the Monetary Policy Committee include Rajiv Ranjan (Executive Director) and Michael Debbrata Patra (Deputy Governor).
(with PTI input)
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