Reserve Bank of India (RBI) Governor Shaktikanta Das will announce the central bank’s monetary policy committee (MPC) meeting outcome on Thursday. The six-member RBI MPC meeting began on Tuesday. The MPC meeting comes amid anticipation that the RBI will keep benchmark interest rates constant at 6.5 per cent to ease retail inflation and push economic growth. The RBI put a pause on its rate hike cycle after the last MPC meeting in April. The central bank has stayed with the 6.5 per cent repo rate. Before this, the Central Bank hiked repo rate by 250 bps since May 2022 to stem inflation.
Meanwhile, Consumer price-inflation (CPI) declined to an 18-month low of 4.7 per cent in April this year. Shaktikanta Das indicated that the May numbers would be lower compared to that of April. CPI numbers for May are slated to come out on June 12. The government has mandated the RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.
Here’s what experts expect from the RBI MPC outcome today
India’s largest public lender State Bank of India (SBI) said in a recent report that it believes the repo rate would remain unchanged while adding the central bank could lower inflation estimates for FY24. The report also quoted the RBI which said the pause in rates was a “temporary arrangement”.
“With sizeable banking failures across AEs, and a fair probability of contagion spreading across markets despite concerted action from policy makers/regulators to check the same, RBI’s endeavor to sidestep from synchronous rate hike was a courageous gambit, especially since climate risk could upend inflationary projections,” said the SBI report.
Vimal Nadar, Head of Research at Colliers India, said that the RBI is likely to keep repo rate unchanged at 6.5 per cent and may continue to focus on the withdrawal of the accommodative stance to keep a check on inflation and maintain economic growth.
Nadar said: “RBI is likely to remain focused on withdrawal of accommodation and keep the repo rate unchanged at 6.5%, in a bid to progressively align inflation within its target while maintaining growth. Consumer price index (CPI) eased to an 18-month low at 4.7% during April 2023 led by monetary policy tightening measures undertaken during 2022, however the high frequency indicators will be closely watched in the current volatile global environment”.
Signature Global India founder and chairman Pradeep Aggarwal believes the central bank should consider a policy rate cut in case there is a possibility to do so.
Aggarwal said: “Our expectation from the upcoming RBI policy is that they will most likely maintain the status quo. However, if there is an opportunity, we believe the apex bank should consider announcing a cut in policy rates, even if it is a small one. This could have a positive impact on consumer sentiment, benefiting the interest-sensitive real estate sector. Of course, it is essential for the government to ensure that any rate cut is effectively passed down to the consumers, ensuring the desired impact on the industry”.
Differing slightly from Nadar and Aggarwal, Jyoti Prakash Gadia, Managing Director—Resurgent India—said pressure on food prices and impact on economy due to uncertainties related to monsoon and geo-political tensions may prompt the RBI to take a wait-and-watch approach.
Gadia said: “However, the pressure on food prices and adverse impact on the economy due to uncertainties about monsoon as well as prolonged geo-political tensions are expected to prompt RBI to adopt a wait-and-watch approach thereby maintaining the repo rate at the existing level”.