RBI MPC decision today: Repo rate to inflation outlook; here's what to track

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), which held a three-day policy review meeting starting June 5, will announce its verdict on Friday, June 7. Among the key outcomes to track is the repo rate announcement, inflation outlook and growth forecast.

The central bank is unlikely to change the repo rate -- the rate at which it lends to commercial banks -- which stands at 6.5% since April last year, economists say.

The reason, they point out, is that the US Federal Reserve is yet to initiate its much-awaited rate cut cycle. Also, the prevailing food inflation and the high-growth logged in the January-March quarter as well as the entire fiscal year ended March 31, 2024, will act as a disincentive to cut the rate at this stage, the economists added.

While the overall rate of consumer price index (CPI) inflation came down to an 11-month low of 4.85% in April, food inflation remained strikingly high at 8.7%.

"RBI is likely to maintain the status quo until inflation is brought within the target range of 4% +/- 2%. Other challenges include extreme weather conditions, stock market volatility, and geopolitical tensions," ICRA chief economist Aditi Nayar said in a statement issued to the press.

First policy review after election results

This was the first policy review meeting conducted by the RBI following the general election results. The repo rate action, along with the inflation outlook and growth forecast, would provide the new government with a monetary framework as it takes charge next week.

For the first in 10 years, the ruling party BJP has slipped behind the majority mark. However, it is set to reform the government with support from smaller allies.

The formation of a coalition regime at the Centre may dampen the pace of some ambitious reforms, some economists suggested, but added that it is unlikely to hinder the path towards fiscal prudence.

Meanwhile, the RBI had, in its last MPC meeting held in April, projected a growth of 7% in FY25. Providing a quarter-wise breakdown, the central bank had said that the economy would grow by 7.1% in Q1, 6.9% in Q2, 7% each in Q3 and Q4.