The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is currently in session, deliberating its monetary policy stance for the financial year 2024-25 (FY25). The six-member committee, chaired by RBI Governor Shaktikanta Das, is expected to announce its decision on August 8, 2024. This meeting is particularly noteworthy as it could mark the ninth consecutive time the central bank has chosen to keep the repo rate unchanged.
Repo Rate Decision History
The RBI MPC has maintained the repo rate steady in its previous eight policy reviews. As the committee meets this week, there is significant interest in whether this trend will continue or if a change in policy is on the horizon.
Current Policy Outlook
In the June policy review, two external members of the MPC, Ashima Goyal and Jayanth R. Varma, advocated for a 25 basis points (bps) reduction in the repo rate. However, the majority view supported maintaining the status quo.
Global Economic Impact
Global economic conditions and their impact on domestic inflation and financial stability are likely to influence the RBI’s decision. Parijat Agrawal, Head of Fixed Income at Union Mutual Fund, suggests that recent inflationary pressures have eased, and concerns over the monsoon have lessened. With fiscal consolidation progressing as planned, Agrawal anticipates that the RBI will maintain the current policy rates. The central bank may adopt a more neutral stance in response to global economic weakness and market volatility.
Market Expectations
Goldman Sachs predicts that the RBI will keep the repo rate unchanged at 6.50% during the August 8 meeting. According to their report, the decision will likely be supported by a 4:2 vote, with the MPC retaining its ‘withdrawal of accommodation’ stance. The central bank is expected to remain optimistic about growth while reaffirming its commitment to the 4% inflation target.
Meeting Schedule and Updates
The RBI’s MPC commenced its three-day meeting in Mumbai on August 6, 2024. The committee’s discussions are closely watched by financial markets and economists, given the potential implications for monetary policy and economic stability.
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