If you are waiting for your EMIs on home loan, auto loan, personal loan and education loan to go down you might be disappointed. Reserve Bank of India (RBI) governor Shaktikanta Das is supposed to announce the decisions at the Monetary Policy Committee meeting on August 8, 2024. While any decision on key interest rates is significant for any economy, there is near-unanimity among economists that the central bank is not going to change key policy rates this time too.
Repo rate at 6.5%
Incidentally, the RBI has kept policy rates unchanged for the last 18 months. The Repo Rate has been steady at at 6.5% during this period. Das has signalled time and again that they will cut rates only after signs of a durable decline in the retail inflation rates.
One of the reasons for the RBI holding on to high rates is that the country is exhibiting high GDP growth rates despite the elevated interest rates. Food inflation is one of the persistent headaches of the economic policymakers of the country.
ECB, BoE and US Fed movements
The authorities have also indicated that though the European Central Bank (ECB) and Bank of England (BoE) have cut interest rates and the US Federal Reserve is also expected to slash rates in September 2024, the RBI is under no obligation to mirror their moves. ECB slashed it by 25 basis points in early June, while BoE has cut rates from a 16-year high of 5.25% to 5% recently.
Significantly, the voice for a rate cut is growing within the six-member MPC in RBI. In the June meeting, two external members said there is a need to cut rates to boost growth. Jayanth Varma and Ashima Goyal, both external members, voted for rate cuts in the policy meeting in June.
“The RBI’s decision to maintain its stance is driven by domestic inflation concerns, notably within the food sector. This focus suggests a calculated wait-and-see approach, aiming for sustainable achievement of the 4% inflation target, before considering any rate adjustments,” Arsh Mogre, manager – economist at PL Capital told the media.
Food inflation in June
The inflation data in June 2024 might not encourage RBI for a rate cut. In June, food inflation rose and pushed retail inflation up to 5.1%, compared to 4.8% in May. Rising prices of vegetables, cereals and fruits were the culprit. Overall food inflation reached 9.4% while vegetable inflation rose to 29.3%. The RBI governor has been cautioning against food inflation for more than a year now.
RBI governor Shaktikanta Das is expected to announce the decisions on whether they will cut interest rates. The markets are expected to react favourably if there is any. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
