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  1. RBI monetary policy meeting begins today: Check key details and what to expect on interest rates

RBI monetary policy meeting begins today: Check key details and what to expect on interest rates

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2 min read • Updated: April 3, 2024, 12:40 PM

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The RBI is expected to take into account the easing consumer inflation and robust GDP growth in its bi-monthly review meeting. Current repo rate stands at 6.50% and experts expect no rate cut in this meeting.

Stock photo of notes.
RBI commences its bi-monthly Monetary Policy Committee meeting to deliver a decision on repo rates.

The Reserve Bank of India (RBI) will begin its three-day Monetary Policy Committee (MPC) meeting from today. This will be the first MPC meeting of the financial year 2024-25. The committee is expected to discuss the impact of global macroeconomic winds on the Indian economy’s growth trajectory and inflation trends.

The six-member rate-setting panel, which will be led by RBI governor Shaktikanta Das, provides a framework for banks to adopt for the remainder of the new financial year. In February 2023, the MPC hiked the rate by 25 basis points to 6.50% but has kept it unchanged since then.

India’s consumer price index (CPI) eased to 5.09% in February 2024 from 5.10% in January 2024. Meanwhile, India logged an 8.4% increase in its GDP for the third quarter of FY24, the fastest growth among major economies.

Market experts expect the MPC to keep the repo rate unchanged at 6.50%, in line with the central bank’s “withdrawal of accommodation” stance. The repo rate is a key monetary tool through which the central bank controls the money supply in the economy and manages inflation. Basically, it is the rate at which the central bank lends money to commercial banks.

A withdrawal of accommodation stance implies a curtailed monetary policy, wherein the central bank is trying to rein in inflation by reducing the money supply.

In the February 2024 MPC meeting, RBI Governor Shaktikanta Das highlighted that “Monetary policy must remain vigilant and not assume that our job on the inflation front is over. We must remain committed to successfully navigating the ‘last mile’ of disinflation which can be sticky.'' Deputy Governor Michael Patra added “It is only when inflation subsides and stays close to the target lastingly that policy restraint can be eased.”

As per an SBI research report, cited by Mint, the RBI might only consider cutting interest rates from the third quarter of financial year 2025. This forecast is based on historical trends that indicate that emerging economies change their rates with a lag of two months in response to rate changes in developed economies like the US and the UK.