 "RBI MPC policy: Repo rate in focus; what factors may influence decision? | Economy & Policy News")
Mumbai: Reserve Bank of India Governor Shaktikanta Das addresses during the 188th AGM of Bombay Chamber Of Commerce & Industry, in Mumbai, Tuesday, June 25, 2024. (Photo: PTI)
According to economists, the RBI is expected to hold the rate amid inflationary pressures. The team, led by Das, has not changed the repo rate since February 2023, maintaining it at 6.5 per cent for the past eight policy reviews.
What to expect from RBI MPC on repo rates and the economy?
Manoranjan Sharma, chief economist of Infomerics Ratings, believes that the August 2024 policy is like “gazing into the crystal ball.” He predicted that the MPC will maintain its “withdrawal of accommodation” stance and keep the repo rate unchanged for the ninth consecutive time.
He noted that the decision will be influenced by inflation concerns since June’s retail inflation breached the 5 per cent mark. The target set by the Centre is to keep inflation at 4 per cent, with an upper tolerance limit of 6 per cent and a lower tolerance limit of 2 per cent. Retail inflation was recorded at a four-month high of 5.08 per cent in June.
Will the US Fed rate outcome influence the RBI decision?
Sharma called for a compelling need for vigilance on the inflation score and noted that the US Federal Reserve’s (RBI’s equivalent in the US) action at the impending September meeting may also impact India’s fiscal policy. Reuters reported on Monday, citing experts, that there is a 100 per cent chance of at least a 50 basis points (bps) rate reduction by the Fed next month.
This anticipation is bolstered by weaker-than-expected jobs data for July in the US. On Monday, Fed policymakers, while denying that this data indicated that the economy is in recessionary freefall, added that a rate cut was certain to avoid it. Sharma said that a rate cut by the US Fed is likely to have a spill-over effect, including “inducing central bankers to move to a less restrictive policy.”
Will RBI MPC introduce a repo rate cut soon?
An earlier poll by Business Standard indicated that the MPC is likely to hold the rate this time. However, there is a chance for an October rate cut due to the recent souring of global market sentiment, Reuters reported.
First Published: Aug 08 2024 | 9:12 AM IST
