The Reserve Bank of India (RBI) may once again keep the key interest rate unchanged in its bilateral monetary policy review at the end of next week. Experts have predicted that inflation has crossed the upper level of the prescribed limit, and in view of the disappointing GDP growth data for the second quarter, the Central Bank may reduce the estimate of increasing the repo rate.
When will this meeting take place?
The six-member Monetary Policy Committee (MPC) chaired by the Reserve Bank Governor is scheduled to meet on December 4-6, 2024. Governor Shaktikanta Das will announce the decision of the meeting on December 6. It is generally believed that RBI will soon start reducing prime interest rates, but the central bank will have very little choice this time. This is because retail inflation is above six percent.
What is the estimate?
The Reserve Bank has kept the repo rate or short-term borrowing rate at 6.5 percent from February 2023. Experts believe that some relief can be found only in February 2025. Madan Sabnavis, Chief Economist of Bank of Baroda, said that in view of the uncertainty in the global environment and the possible impact on inflation, the status quo on the repo rate may remain.
He said there will be changes in RBI’s projections for both inflation and GDP, as inflation has so far been higher than RBI’s forecast for the third quarter and GDP growth has been much lower than expected in the second quarter.
What do experts say?
ICRA Chief Economist Aditi Nair said that inflation based on consumer prices has crossed six percent in October 2024. In such a situation, it is expected that the MPC will maintain the status quo in the December 2024 meeting. Nair said that at the same time, we estimate that the MPC will reduce its growth forecast for the financial year 2024-25 next week. If inflation softens further, rates may be cut in February 2025.