The Reserve Bank of India (RBI) is expected to maintain the status quo on short-term interest rates in its upcoming monetary policy review. Experts believe that with inflation remaining within the comfort zone and the Indian economy experiencing accelerated growth, the RBI will hold off on making any changes to the benchmark policy rate.
The RBI has previously kept the benchmark policy rate unchanged in its last four bi-monthly monetary policies. The last repo rate increase was in February, when it reached 6.5% after a series of hikes prompted by the Russia-Ukraine war and global supply chain disruptions, resulting in high inflation in India.
The Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, is scheduled to begin its three-day deliberations on December 6, with a decision expected to be announced on December 8. Despite the ongoing growth of the Indian economy, expectations are that the RBI will maintain the current interest rates and stance.
The retail inflation in India has eased to a four-month low of 4.87% in October, primarily due to cooling prices of food items. In its October meeting, the MPC projected CPI inflation at 5.4% for 2023-24, showing a moderation from the 6.7% in 2022-23.
Overall, experts anticipate that the RBI will continue with its policy and stance pause, as the economy remains on a growth trajectory. The government’s mandate for the RBI is to ensure that retail inflation remains at 4% with a margin of 2% on either side. Additionally, the agricultural sector will benefit from technological advancements and farm mechanization, which can be supported by both public and private sector investments.
The upcoming monetary policy review is expected to provide further stability and confidence in the Indian economy. A stable interest rate environment will not only benefit homeowners but also make housing loans more accessible and affordable.
Historically, the RBI has adjusted interest rates based on the prevailing economic conditions. The decision to maintain the current interest rates is reflective of the confidence in the growth of the Indian economy, balanced with the need to manage inflation and support various sectors, such as agriculture and housing.
It is anticipated that the RBI will keep the policy repo rate unchanged at its next meeting and may move to a neutral policy stance. The decision will be made by the six-member MPC, comprising three external members and three officials of the RBI.
