The Reserve Bank of India (RBI) will on Friday announce its bimonthly monetary policy statement which is closely watched by financial market participants. The statement by RBI Governor Shaktikanta Das on Friday morning will be followed by a press conference.
The three-day bi-monthly monetary policy committee (MPC) meeting, which began on Wednesday, is closely watched by financial market participants.
During these meetings, the central bank deliberates on various economic indicators, including interest rates, money supply, inflation outlook, and macroeconomic trends.
According to SBI Research, it is anticipated that the RBI will maintain the current key repo rate, pausing at 6.50 per cent. The report authored by Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI Research, suggests a prolonged pause in the interest rate due to a tapering seasonality of inflation.
The report also notes that the RBI’s stance should focus on withdrawing accommodation, as it is unlikely that inflation will fall below 5 per cent for the remainder of the 2023-24 fiscal year.
In its last three meetings in April, June, and August, the RBI kept the repo rate unchanged at 6.5 per cent. The repo rate is the interest rate at which the RBI lends to other banks.
Rating agency Crisil also predicts that the monetary policy committee will maintain the policy rate in the October meeting. Crisil’s August report titled ‘RateView – CRISIL’s outlook on near-term rates’ suggests that a 25 basis point rate cut in early 2024 is a conditional possibility.
The RBI’s decision is influenced by several factors, including retail inflation. Additionally, the RBI is likely to consider the U.S. Federal Reserve’s persistent hawkish stance.
India has managed its inflation trajectory relatively well despite inflation concerns in many countries, including advanced economies.
After three consecutive pauses, the RBI raised the repo rate by a total of 250 basis points to 6.5 per cent since May 2022 to combat inflation.
Headline inflation in India increased to 7.8 per cent in July but later fell to 6.8 per cent in August. Following the August monetary policy meeting, the RBI revised its retail inflation projection for 2023-24 to 5.4 per cent, compared to the 5.1 per cent projected in its previous June meeting.
Governor Shaktikanta Das has emphasized the importance of aligning inflation with the target of 4.0 per cent.
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