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  4. RBI MPC meeting this week: What economists expect on repo rate action

RBI MPC meeting this week: What economists expect on repo rate action

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2 min read • Updated: April 1, 2024, 11:06 AM

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Summary

RBI MPC meeting this week: Icra Ratings chief economist Aditi Nayar said the repo rate is unlikely to be changed, given the fact that the economy grew at over 8% in the last three quarters, and the retail inflation stood at 5.1% in February 2024, which is still significantly higher than the RBI’s medium-term target of 4%.

A note issued by CareEdge Ratings also pointed out that the RBI MPC will maintain status quo on both rates and stance
A note issued by CareEdge Ratings also pointed out that the RBI MPC will maintain status quo on both rates and stance

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will be meeting this week in Mumbai to review the policy on the key lending rates. Economists expect the RBI panel to keep the repo rate – the rate at which the central bank lends to commercial banks – unchanged at 6.5%.

The meeting will be held from April 3 to April 5. Following its conclusion, RBI Governor Shaktikanta Das will announce the decision taken on the rates front. The MPC had last recommended an upward revision in the repo rate in February 2023.

Since then, over the last six policy review meetings, the benchmark lending rate has remained unchanged at 6.5%. Analysts believe that the rates will continue to remain the same following the meeting to be held this week.

Icra Ratings chief economist Aditi Nayar said the repo rate is unlikely to be changed, given the fact that the economy has grown at a rate of over 8% in the last three quarters – as per the upward revision made by the National Statistics Office (NSO) – and the retail inflation rate coming in at 5.1% in February 2024, which is still significantly higher than the RBI’s medium-term target of 4%.

“Icra believes that the policy stance is unlikely to be changed before the August 2024 MPC review until there is visibility on the monsoon turnout as well as on the sustenance of the growth momentum and the US Fed’s rate decisions,” Telegraph quoted Nayar as saying.

A note issued by CareEdge Ratings also pointed out that the RBI MPC will maintain status quo on both rates and stance – withdrawal of accommodation – in the upcoming policy meeting. Any rate cut is expected to commence only in the second half of calendar year 2024, it added.

Meanwhile, economists at Goldman Sachs Research see a 25 basis points (bps) rate cut in the July-September period, followed by a similar rate in October-December. The analysts at Morgan Stanley also foresee two rate cuts, of 25 bps each, starting from August or September this year.