Reserve Bank Monetary Policy Committee begins deliberations on bi-monthly monetary policy

Mumbai, Dec 4 (PTI) A top Reserve Bank panel on Wednesday began deliberations on the bimonthly monetary policy as interest rates are expected to remain unchanged as retail inflation is above the central bank’s tolerance limit.

The six-member Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, will announce the decision on Friday (December 6).

Das is chairing the last MPC meeting of his current term, which will end on December 10.

The government has tasked the Reserve Bank of India to ensure that consumer price index (CPI)-based inflation remains at 4%, with a gap of 2%.

The Reserve Bank has kept the repo, or short-term lending rate, unchanged at 6.5% since February 2023, and experts believe some degree of easing is only possible in 2025.

“We do not expect any rate cut this financial year…a first rate cut and a possible further change in stance in April 2025,” an SBI research note said.

The report further said it would be best if second-quarter growth data “does not trigger a knee-jerk reaction to monetary impulses such as rate cuts” as headline inflation continues to be at troubling levels.

India’s economic growth slowed to a near two-year low of 5.4% in the July-September quarter of this fiscal year due to poor performance in the manufacturing and mining sectors. Gross domestic product (GDP) grew by 8.1% in the July-September quarter of fiscal 2023-24.

The central bank last raised the repo rate to 6.5% in February 2023 and has kept the rate at the same level since then.

The Reserve Bank of India kept the repo rate unchanged in the last bi-monthly review (October), also amid risks of rising food inflation.

In response to MPC expectations, Mandar Pitale, chief financial officer of SBM Bank of India, said that the Reserve Bank of India may consider injecting durable liquidity by reducing the CRR in phases (a two-stage reduction of 25 basis points before the next MPC meeting). to support growth rather than injecting liquidity to support economic growth. rather than considering interest rate cuts. MPC may also consider the option of injecting durable liquidity through OMO purchases.

BASIC Home Loan CEO and co-founder Atul Monga also expects the Reserve Bank of India to keep the repo rate unchanged to balance inflation and support economic growth.

Monga said: “With repo rates remaining unchanged, housing demand is expected to remain stable, supported by stable interest rates, especially for mid-range and luxury properties. Both developers and homebuyers can benefit from the predictability of borrowing costs. ”

At its off-cycle meeting in May 2022, the Monetary Policy Committee raised the policy rate by 40 basis points, followed by rate hikes of varying magnitudes in subsequent meetings until February 2023. The repo rate increased by a cumulative 250 basis points during February 2023. May 2022 and February 2023.

MPC members include: Nagesh Kumar, Director and CEO, Industrial Development Institute, New Delhi; Saugata Bhattacharya, Economist; Ram Singh, Dean, Delhi School of Economics; Rajiv Ranjan, Executive Director, Reserve Bank of India; Deputy Governor, Reserve Bank of India Michael Debabrata Patra; and Reserve Bank of India Governor Shaktikanta Das.