RBI Monetary Policy: The Reserve Bank of India (RBI) is set to begin its three-day monetary policy committee (MPC) meeting today, on October 7, and will conclude on October 9 (Wednesday).
Notably, in its last nine consecutive meetings, the central bank has kept the repo rate unchanged at 6.50 per cent, with a view to balance inflation and economic growth. This time, expectations are varied, with many looking for signs that may indicate a shift in the RBI's stance.
This is the first meeting of the six-member RBI MPC after half the members were changed last week.
RBI Governor Shaktikanta Das, is expected to announce the MPC decision at 10 am on October 9, followed by a press conference at noon.
You can catch both live streams on RBI's YouTube channel, Facebook and X (formerly Twitter) official accounts.
The panel is expected to weigh factors such as inflation (food and fuel), global economic uncertainties (crude oil prices, Middle East tensions), and India's economic growth prospects. Watchers think inflationary issues and global uncertainties in particular may compel the RBI to reconsider its current stance.
Market participants and analysts are closely monitoring this meeting for any forward guidance on future rate actions. Many believe the RBI will continue its wait-and-watch approach, but a surprise rate hike cannot be entirely ruled out.
Nine out of 10 economists polled by Mint said the RBI MPC may introduce a 25 bps (basis point) rate cut, but only in December.
For the meeting on 7-9 October, the consensus was that the panel is likely to keep the benchmark repo rate unchanged at 6.5 per cent for the 10th successive time.
In terms of policy stance, just half the economists polled by Mint expect the MPC to retain its stance of ‘withdrawal of accommodation’, while the other half expects an upgrade to ‘neutral’ for the first time in two years since the rate hike cycle started.
“We do not expect any change in the repo rate or stance by MPC. The reason is that inflation for September and October will be above 5 per cent, and the present low inflation is due to the base effect. Besides, core inflation is inching upwards. Further, the recent Iran-Israel imbroglio can intensify, and there is uncertainty here. Hence, the status quo is the most likely option even for new members. Inflation forecast may be lowered by 10-20 bps and no change in GDP forecast likely,” said Madan Sabnavis, Chief Economist, Bank of Baroda.
Icra Chief Economist Aditi Nayar said that given the undershooting in the initial first quarter GDP growth relative to the MPC's forecast and the likely sizeable undershooting in the second quarter CPI inflation print as well, “we believe a stance change to neutral may be appropriate in the October 2024 policy review”.
“This could be followed by a shallow rate-cutting cycle of 25 bps each in December 2024 and February 2025. The abundant monsoon offers some insurance for crop inflation. The impact of global political developments and geopolitical uncertainty on the growth inflation dynamics remains a risk,” Nayar added.
An HSBC report said three developments stand out — softer growth numbers have trickled in recently, inflation has been falling, and the external environment has moved from rate hikes to cuts.
“We believe the RBI doesn't gain from waiting any longer. We think it will change its stance from a hawkish 'withdrawal of accommodation' to 'neutral' in the upcoming 9 October policy meeting, followed by repo rate cuts of 25 bps each in the December and February meetings, taking the repo rate to 6 per cent,” the report said.
Earlier in October, the Centre appointed three new members to the RBI's monetary policy panel. These three external members of the six-member panel are routinely nominated and appointed by the central government.
The new members are Saugata Bhattacharya, economist; Dr Nagesh Kumar, Director and Chief Executive, Institute for Studies in Industrial Development; and Professor Ram Singh, Director, Delhi School of Economics, University of Delhi. They join RBI Governor and MPC Chairperson Das, Rajiv Ranjan, serving as Executive Director, and Michael Debabrata Patra, as the Deputy Governor.
Bhattacharya, Kumar, and Singh, replace Shashanka Bhide, Ashima Goyal, and Jayanth R Varma as the external members.
(With inputs from Agencies)
