The Reserve Bank may again keep the key interest rate unchanged in April as it is likely to focus more on bringing down inflation to the 4 per cent target after concerns over economic growth abated with GDP growth estimated at nearly 8 per cent, said experts.
The Monetary Policy Committee (MPC) of the Reserve Bank, headed by Governor Shaktikanta Das, is scheduled to meet from April 3 to 5, with the decision to be announced on April 5. This will mark the first bi-monthly monetary policy of fiscal 2024-25, with six MPC meetings scheduled for the fiscal year.
Following the last repo rate hike to 6.5 per cent in February 2023, the RBI has maintained the rate at the same level in its last six bi-monthly policies.
Experts anticipate that given the current inflation rate of around 5 per cent and potential future shocks in food inflation, the MPC is expected to maintain the status quo on both the rate and stance in the upcoming meeting. They also suggest that any revision in GDP forecasts will be eagerly awaited.
India’s robust economic growth in the December quarter of fiscal 2023-24, along with upward revisions in GDP estimates for previous quarters, and a CPI print of 5.1 per cent for February 2024, suggest that rates and stance are likely to remain unchanged.
Although some emerging economies have started cutting policy rates, major central banks like the US and UK remain cautious. This cautious approach, coupled with the narrowing yield differential between India and the US, may influence the MPC’s decision.
While the majority view favors a status quo, there is a possibility of a few MPC members voting for a rate cut. However, this is not expected to be the majority opinion.
Some industry representatives, like Nitin Gupta from CREDAI NCR, Bhiwadi Neemrana, express hope for a marginal reduction in the repo rate, which could stimulate growth in the affordable housing segment.
In a recent report, Moody’s also suggested that the RBI will likely keep rates on hold in the coming months, considering strong growth and firm inflation.
The government has mandated the RBI to ensure that CPI-based inflation remains at 4 per cent with a margin of 2 per cent on either side.
RBI Deputy Governor Michael Debabrata Patra, in a recent address, highlighted the moderation of inflation in India after various supply shocks. He mentioned that inflation has fallen back into the tolerance band since September 2023, with core inflation steadily declining.
The MPC comprises various members, including Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Rajiv Ranjan, and Michael Debabrata Patra, alongside Governor Shaktikanta Das.
Sources Of Information: Business Standard
