reserve Bank of India The Reserve Bank of India (RBI) is unlikely to cut the key interest rate repo in its bi-monthly monetary policy review meeting this week. Experts have expressed this opinion. He says retail inflation still remains a concern, and the Middle East crisis is likely to worsen, which will weigh on crude oil and commodity prices. Earlier this month, the government reconstituted the Monetary Policy Committee (MPC) – the rate-setting committee of the Reserve Bank of India (RBI). The reconstituted committee with three newly appointed external members will begin its first meeting on Monday.
Decision will come on October 9
MPC Chairman RBI Governor Shaktikanta Das will announce the outcomes of the three-day meeting on Wednesday (October 9). The Reserve Bank of India has kept the repo rate unchanged at 6.5 percent from February 2023. Experts believe that there is scope for some relaxation in this only in December. The government has tasked the central bank to ensure that Consumer Price Index (CPI) based retail inflation remains at four per cent (up or down two per cent). In the current perspective, experts believe that the RBI will probably not follow the US Federal Reserve, which has reduced the benchmark rates by 0.5 per cent.
Little hope of change in RBI’s stance
The RBI will also not follow the central banks of some other developed countries, which have reduced interest rates. Madan Sabnavis, chief economist at Bank of Baroda, said, “We do not expect any change in the repo rate or the stance of the MPC. This is because inflation will remain above five percent in September and October and the current low inflation is due to base effect. “Besides, core inflation is rising slowly.” Sabnavis said that in addition, the recent Iran-Israel conflict could deepen further, and there is uncertainty here. Therefore, status quo is the most likely option even for new members.
No change expected in GDP estimates
Inflation forecast may be lowered by 0.1-0.2 percent and gross domestic product (GDP) estimate is unlikely to change. The central bank last raised the repo rate to 6.5 percent in February, 2023 and since then, it has kept the rate at the same level. ICRA Chief Economist Aditi Nair said that given the GDP growth in the first quarter to be lower than the MPC’s estimate and the retail inflation forecast to be lower in the second quarter, we believe that the stance will be revised in the policy review of October 2024. It may be appropriate to change it to ‘neutral’. He said that after this the repo rate may be reduced by 0.25 percent in December, 2024 and February, 2025. Signature Global (India) Ltd. Pradeep Agarwal, Founder and Chairman, said that home buyers along with the real estate industry and the developer community are expecting a cut in interest rates, but the central bank will probably keep the interest rates unchanged for the tenth consecutive time.
