New Delhi: RBI MPC Meet kicked-off on Monday, October 07, 2024. If India’s central bank reduces the bank rate then EMIs on various types of loans can reduce for borrowers in the country. Albeit, the Reserve Bank of India is unlikely to slash the benchmark interest rate (repo rate) as the RBI Governor Shaktikanta Das would take the final call on Wednesday, October 9. The reconstituted MPC is expected to maintain status quo on 6.50% interest rate as has been the case since February 2023.
Why Status Quo Will Be Maintained On RBI MPC Meet?
Numerous economists and analysts have opined that rates will not be changed due to high vegetable inflation in the country. Albeit, the apex bank has been able to keep retail inflation below the set tolerance band of 4-6%. August 2024 CPI Inflation was quoted at 3.65% in the country. But, vegetable prices have been high for quite a long time. CPI vegetable inflation in August was reported to be in double digits of 10.71%. While, pulses and products inflation was quoted to be at 13.60% in the same month. Price rise of food items in double digits is disturbing thing for India’s economy. The policymakers couldn’t take the risk of slashing rates at the ongoing RBI MPC Meet as they are unlikely to take any chance. They are likely to wait for considerable fall in inflation before kick starting the rate cut cycle.
In recent past, the western central banks have slashed their interest rates, while, India’s central banks have kept rates steady at RBI MPC Meets nine different times since February 2023. The US Fed Reserve had slashed its benchmark rates by 50 basis points. While, the European Central Bank had trimmed rates twice in the current calendar year. But state of affairs of the Indian economy is quite different from the US economy. On one side, the former continues to grow at healthy GDP rate while the latter has not yet completely managed to guard away recession fears.
With these factors into consideration, India’s policymakers are unlikely to change status quo on repo rate in the ongoing RBI MPC Meet.
Recently, the Government of India reconstituted the committee in the backdrop of the RBI MPC Meet. Three members have been replaced namely Ram Singh (Director of Delhi School of Economics, University of Delhi), Nagesh Kumar (Director and Chief Executive, Institute for Studies in Industrial Development) and Saugata Bhattacharya. New joinees have being appointed for next four years.
