New Delhi: The Reserve Bank of India (RBI) is all set to announce the outcome of the Monetary Policy Committee (MPC) decision on Thursday amidst market speculations that the central bank might go for another interest pause this time too.
The three-day MPC meeting Chaired by RBI Governor Shaktikanta Das, commenced on February 6 and is set to conclude today. A year is divided into six bimonthly reviews of the central bank’s monetary policy. Additionally, there are out-of-cycle reviews, where the central bank holds extra sessions in urgent situations.
For a year, the Reserve Bank has kept the repo rate unchanged at 6.5 percent. The benchmark interest rate was last raised in February 2023 to 6.5 percent from 6.25 percent.
Suman Chowdhury, Chief Economist and Head – Research, Acuité Ratings & Research said that RBI MPC is likely to maintain the status quo on rates at least till Jun 2024.
“We anticipate a rate cut thereafter aggregating to 50-75 bps in the next six months. The policy stance may, however, be changed to neutral by Apr-24, given the low likelihood of a further rise in interest rates,” he added.
Echoing the same views on Rate status-quo, George Alexander Muthoot, MD, Muthoot Finance said the focus on fiscal consolidation in the recent Interim budget by the honourable Finance Minister, may give some headroom to the RBI to change stance to ‘Neutral’ from the current stance of ‘withdrawal of accommodation’.
“In the backdrop of recent tight system liquidity conditions, the industry will watch out for RBI’s communication and view on system liquidity. Amidst the slowdown in global economy, the resilience of Indian economy clearly stands out, and the Government focus on capex spending along with the RBI’s prudent monetary policy is likely to keep Indian economy on the steady growth trajectory, while keeping the demand conditions intact,” Muthoot added.
Meanwhile, an SBI Research report said that it expects the RBI to continue pause stance in upcoming policy. The report also added that We believe the RBI should continue its stance to withdrawal of accommodation.
“Strong US non-farm payroll data and wages seem to have pushed back on market expectations for a quick pivot to rate cuts. First rate cut on table from Jun’24. Aug’24 looks the best bet now,” it added.