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The central banking authority of India has kept the
The repo rate, is the interest rate at which banks draw funds from
Monetary Policy Committee was constituted under the Reserve Bank of India Act, 1934. MPC is a six-member committee comprising three members from RBI including Governor Shaktikanta Das and three members appointed the Central government.
The two-day review meeting of the MPC that commenced on April 3 concludes today.
The RBI had maintained the status quo on policy rates and stances in its last review, which was held in February 2024. The decision however was not unanimous and one member has recommended a rate cut of 25 basis points and policy change stand to neutral.
Since the last policy, rating agencies have revised India’s growth forecast upwards.
Inflation has dropped and has remained under the range of comfort zone. Consumer Price Index inflation was 5.1 per cent in February 2024, up from over 5.5 per cent in December 2023.
The core CPI inflation, excluding food and beverages, was at a low of 3.5 per cent in February 2024. However, food inflation at above 7 per cent was a concern, but with a recent cut in the prices of petrol, diesel and LPG, it is likely to further fall in March and may come below 5 per cent.
Meanwhile, the India Meteorological Department’s (IMD) recent announcement of above-normal temperatures during April-June may be a concern regarding rise in prices of vegetable, fruits and other perishable items.
Also prices of rice, pulses have shown an upward trend which may be a concern for the MPC while taking a decision. However, softening prices of non-food items will give some relief to the committee.
Generally, normal monsoons follow above normal temperatures, presuming that the average CPI inflation is likely to be in the RBI’s comfort zone of 4-6 per cent in FY25.
According to official data, retail inflation in India eased a tad in February to 5.09 per cent from 5.10 per cent the prior month, due to the deceleration of prices in all categories except food.
Experts believe that the RBI is unlikely to change its policy stance before the August 2024 MPC review and any rate cut is unlikely before that.
The US Fed has also recently indicated that it is not in a hurry to cut rates. All these suggest that the RBI, too, is unlikely to go for a rate cut before the October 2024 policy.
The next MPC meetings of the RBI have been scheduled this year for June, August, October, December and February 2025.