 "Shaktikanta Das, Shaktikanta, RBI Governor")
The Reserve Bank of India is set to conclude its three-day Monetary Policy Committee (MPC) meeting on Thursday, which is largely focused on framing policies to control inflation in India.
Governor Shaktikanta Das will announce the committee's decision at 10 am today regarding whether the body will hold or change the repo rate, which is the rate of interest at which the central bank lends to commercial banks in India.
According to economists, the RBI is expected to hold the rate amid inflationary pressures. The team, led by Das, has not changed the repo rate since February 2023, maintaining it at 6.5 per cent for the past eight policy reviews.
Coming up:
— ReserveBankOfIndia (@RBI) August 7, 2024
Monetary Policy statement by #RBI Governor @DasShaktikanta
on August 08, 2024, at 10:00 am. Watch live at: https://t.co/9NAjm5mdNt
Post policy press conference telecast at 12:00 pm on the same day at https://t.co/Suw6dXobEP#rbipolicy #rbigovernor #rbitoday… pic.twitter.com/DE2h8TmMNF
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Besides inflation goals, the RBI MPC also focuses on promoting growth. India emerged as the fastest-growing economy last year (with real GDP growth at 8.2 per cent) and is expected to grow at 7.2 per cent this year, the RBI predicts.
What to expect from RBI MPC on repo rates and the economy?
Manoranjan Sharma, chief economist of Infomerics Ratings, believes that the August 2024 policy is like “gazing into the crystal ball.” He predicted that the MPC will maintain its “withdrawal of accommodation” stance and keep the repo rate unchanged for the ninth consecutive time.
He noted that the decision will be influenced by inflation concerns since June’s retail inflation breached the 5 per cent mark. The target set by the Centre is to keep inflation at 4 per cent, with an upper tolerance limit of 6 per cent and a lower tolerance limit of 2 per cent. Retail inflation was recorded at a four-month high of 5.08 per cent in June.
Will the US Fed rate outcome influence the RBI decision?
Sharma called for a compelling need for vigilance on the inflation score and noted that the US Federal Reserve’s (RBI’s equivalent in the US) action at the impending September meeting may also impact India’s fiscal policy. Reuters reported on Monday, citing experts, that there is a 100 per cent chance of at least a 50 basis points (bps) rate reduction by the Fed next month.
This anticipation is bolstered by weaker-than-expected jobs data for July in the US. On Monday, Fed policymakers, while denying that this data indicated that the economy is in recessionary freefall, added that a rate cut was certain to avoid it. Sharma said that a rate cut by the US Fed is likely to have a spill-over effect, including “inducing central bankers to move to a less restrictive policy.”
Will RBI MPC introduce a repo rate cut soon?
An earlier poll by Business Standard indicated that the MPC is likely to hold the rate this time. However, there is a chance for an October rate cut due to the recent souring of global market sentiment, Reuters reported.
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