As the Monetary Policy Committee (MPC) led by Reserve Bank of India Governor Shaktikanta Das begins its three-day deliberations on Wednesday, economists predict that the central bank would retain its 'removal of accommodation' posture and keep the repo rate constant at 6.50 percent. RBI Governor Shaktikanta Das will announce the verdict on December 8th.
The RBI MPC is made up of six members that are both external and RBI personnel. Along with Governor Shaktikanta Das, other RBI executives include Rajiv Ranjan, Executive Director, and Michael Debabrata Patra, Deputy Governor. External members include Shashanka Bhide, Ashima Goyal, and Jayanth R Varma.
According to experts, the RBI is expected to maintain repo rates steady, despite the fact that retail inflation is above the 4% goal notwithstanding reduction, and economic growth remains solid. Furthermore, crude oil prices are volatile, and geopolitical uncertainties loom.
"In its 8 December meeting, we expect the MPC to remain on a cautious hold and keep the repo rate unchanged at 6.50 percent," said Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics at Barclays. The central bank may warn of inflationary concerns from a probable return of food price shocks and their influence on inflation expectations, even if core inflation remains moderate."
"In terms of outlook, we think the RBI may raise its annual growth forecast modestly, but is likely to keep its inflation forecasts unchanged, citing uncertainty around the near term outlook due to possible changes in domestic food and international energy prices," he said.
Economists also praised the upbeat GDP figures, saying that they will provide comfort to the MPC and that a continued pause is a foregone conclusion at this meeting. "Given the better-than-expected economic growth in Q2FY24, we expect the RBI to revise up its growth projections from 6.5 percent to 6.5 percent by 20-30 basis points," said Rajani Sinha, CareEdge's Chief Economist.
While the RBI is likely to remain hawkish in order to express its prudence, economists and analysts believe the central bank would not consider rate decreases until the following fiscal year.
