Mumbai: The Reserve Bank of India’s rate-setting panel — Monetary Policy Committee (MPC) will commence its maiden meeting on October 7, 2024 (Monday). The government recently reconstituted the RBI panel for the MPC. The reconstituted panel has three newly appointed external members.
Experts believe that the central bank will not go ahead with cuts in benchmark interest rate in its forthcoming bi-monthly monetary policy review. The analysts believe that with retail inflation still remaining a cause of concern, and the possibility of the Middle East crisis impacting crude oil and commodity prices, the RBI will maintain a status quo on the repo rate. RBI Governor Shaktikanta Das will reveal the outcome of the MPC on October 9 (Wednesday).
The repo or short-term lending rate has remained unchanged at 6.5 per cent since February 2023. Some experts opine that some easing could come in December.
The government has repeatedly asked the RBI to ensure that Consumer Price Index (CPI) based retail inflation remains at 4 per cent with a margin of 2 per cent on either side.
Experts said that as per the current situation, the RBI is expected not to follow the US Federal Reserve, which lowered the benchmark rates by 50 basis points. Notably, central banks of some developed nations have also reduced the interest rates.
“We do not expect any change in the repo rate or stance by MPC. The reason is that inflation for September and October will be above 5 per cent, and the present low inflation is due to the base effect. Besides, core inflation is inching upwards,” said Madan Sabnavis, Chief Economist, Bank of Baroda.
Sabnavis also raised concern over the Iran-Israel imbroglio, saying there is uncertainty here.
“Hence, the status quo is the most likely option even for new members. Inflation forecast may be lowered by 10-20 bps and no change in GDP forecast likely,” said Sabnavis.
Icra Chief Economist Aditi Nayar also opined that the central bank will maintain a status quo on interest rate cut. “We believe a stance change to neutral may be appropriate in the October 2024 policy review,” Nayar said.
“The abundant monsoon offers some insurance for crop inflation. The impact of global political developments and geopolitical uncertainty on the growth inflation dynamics remains a risk,” the Icra Chief Economist added.
An HSBC report said softer growth numbers have trickled in recently, inflation has been falling, and the external environment has moved from rate hikes to cuts.
“We believe the RBI doesn’t gain from waiting any longer. We think it will change its stance from a hawkish ‘withdrawal of accommodation’ to ‘neutral’ in the upcoming 9 October policy meeting, followed by repo rate cuts of 25 bps each in the December and February meetings, taking the repo rate to 6 per cent,” the report said.
Several experts said that the status-quo will be maintained on interest rate likely in the RBI Monetary Policy Committee (MPC) meeting. Economy Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
