RBI policy today, experts expect MPC to keep rates unchanged: All you need to know

Meanwhile, India’s retail inflation in June, even though stayed under the tolerance band of the RBI, touched a three-month high of 4.81 per cent.

India’s consumer price index (CPI) for July will be released on August 14, Monday. Private data collectors and analysts such as the Centre for Monitoring Indian Economy (CMIE) expect retail inflation to shoot well outside the RBI’s comfort zone. Read more

RBI’s MPC decides the central bank’s monetary policy for the country, with a target of keeping India’s inflation under 4 per cent, and within a tolerance range of 2 to 6 per cent.

Currently, the repo rate stands at 6.50 per cent, which the RBI’s MPC has kept unchanged for the last two cycles. Before that, the central bank’s policy committee hiked the repo rate by 250 basis points from May 2022 to February 2023.

Kotak Institutional Equities’ senior economist Suvodeep Rakshit expects that MPC will keep the repo rate unchanged. He said, “We expect the RBI to keep repo rate unchanged, and expect the RBI to sound more hawkish taking into cognisance the upside to inflation estimates.”

While, Sharad Chandra Shukla, Director at Mehta Equities Ltd, said, “The Fed’s recent statements hint at potential rate hikes to curb inflation, despite the looming challenge of a possible US recession. India’s robust economic fundamentals lessen the urgency for rate cuts to boost the economy. Thus, it’s anticipated that the Indian central bank will maintain its current policy rates and stance in the upcoming August 23 policy review.”

“The escalation of food prices is expected to drive inflation even higher, fueled by erratic monsoon patterns and geopolitical influences like Russia’s grain trade agreement withdrawal. Uncertainties linked to El Nino weather patterns remain a notable risk factor. As a result, the potential for a rate cut by India’s central bank in 2024 becomes feasible, provided inflation remains under control,” Shukla added.

A poll of 75 economists conducted by Reuters in July showed the Reserve Bank was expected to keep its repo rate unchanged at 6.50 per cent, but adopt a hawkish tone amid the recent rise in food prices.

Currently, the RBI’s six-member monetary policy committee has maintained an accommodative stance on the monetary policy.

“We believe RBI will maintain a pause in repo rate. What will be important to take note of is the governors’ tone on the rising inflation,” said Kotak Cherry CEO Srikanth Subramanian.

He added, “Crude prices have moved up for the sixth consecutive week on the back of tight supply and improving demand outlook. This coupled with rising vegetable prices will impose pressure on the CPI numbers for July. RBI is expected to remain data dependent going forward, though the increase in inflation prints in June and what we expect in July, the chances of interest rate cut in 2023 looks lower. Overall, We expect to remain in a ‘Higher for longer’ interest rate regime with the withdrawal of accommodation stance to continue in the August policy meet.”