RBI MPC announcement today, unlikely change in rates, RBI may change stance to neutral: Economists
The outcome of this meeting will be crucial for the trajectory of interest rates and broader economic policies in the coming months.
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NEW DELHI: The Reserve Bank of India (RBI) is set to conclude the three-day Monetary Policy Committee (MPC) meeting today, with Governor Shaktikanta Das expected to announce the central bank's decision on policy rates.
The meeting, which began on October 7, has garnered significant attention, as the RBI has maintained the repo rate at 6.50 per cent for the past nine consecutive meetings, adopting a cautious stance to balance inflationary concerns with the need for economic growth. Key factors that the MPC is weighing include persistent inflationary pressures, particularly in food prices, as well as global economic uncertainties.
According to data from the Ministry of Statistics & Programme Implementation, while All India Consumer Price Index (CPI) inflation moderated to 3.65 per cent in August--within the RBI's target band of 2-6 per cent--food inflation remains elevated at 5.65 per cent, above the central bank's medium-term target of 4 per cent. This, coupled with rising global crude oil prices due to geopolitical tensions in West Asia, has intensified concerns over inflation. Despite these challenges, the RBI has so far opted for a status quo on the repo rate, aiming to foster economic recovery after the pandemic.
However, today's announcement will be closely watched to see if the central bank shifts its stance, especially given the external pressures and uncertainties surrounding global markets. Economists, however, have noted that the RBI will not make any changes in its policy stance before December.
"With the focus on taming headline inflation, the RBI is likely to hold the rates although the core inflation is within the limit. It is possible the RBI may shift to the neutral stand" said said M Govind Rao, Member, Fourteenth Finance Commission and former Director, National Institute of Public Finance and Policy.
Governor Das is expected to provide detailed insights into the committee's decision, offering guidance on how the RBI plans to navigate inflation risks while supporting growth.
The outcome of this meeting will be crucial for the trajectory of interest rates and broader economic policies in the coming months.
"In this overarching macroeconomic setting of heightened geopolitical tensions, core inflation inching upwards, oil price volatility, and high food inflation, we anticipate a change in the RBI's policy stance from "withdrawal of accommodation" to "neutral" at its forthcoming MPC meeting on October 9, 2024. However, we do not see any rate action coming and the benchmark interest rates may not undergo any change" said Manoranjan Sharma, Chief Economist, Infomerics Ratings.
