The Reserve Bank of India (RBI) is set to announce its decision on interest rates on Friday morning, following the conclusion of its three-day monetary policy meeting amid high inflation and weak GDP growth.
Experts predict the RBI will maintain the status quo on the short-term lending rate (repo), with possible adjustments to the cash reserve ratio (CRR), given the mixed economic signals.
The RBI announced on social media platform X, “Coming up: Monetary Policy Statement by #RBI Governor @DasShaktikanta on December 06, 2024, at 10:00 am.”
Governor Shaktikanta Das is leading the six-member Monetary Policy Committee (MPC) for what is his final meeting of his current term, which ends on December 10.
The MPC has held the repo rate at 6.5 per cent since February 2023, following a 250 basis-point increase between May 2022 and February 2023. The repo rate was last raised to 6.5 per cent in February 2023, and has since remained unchanged.
The government has tasked the RBI with keeping consumer price index (CPI)-based inflation at 4 per cent, with a margin of 2 per cent on either side.
Economists noted that the economic outlook is marked by uncertainty regarding growth and inflation.
Experts suggested that a CRR cut could provide liquidity to the banking system without directly affecting the repo rate. They also expects a 50 basis-point cut in CRR between December 2024 and February 2025, lowering it from 4.5 per cent to 4 per cent.
Retail inflation spiked to a 14-month high of 6.21 per cent in October, driven largely by rising food prices. This was above the RBI’s upper tolerance level of 6 per cent, with inflation standing at 5.49 per cent in September and 4.87 per cent in October 2023.
In its preview report, Emkay Global Financial Services noted that India’s GDP growth had slowed to a near two-year low of 5.4 per cent in the July-September quarter of this fiscal, largely due to weak performance in the manufacturing and mining sectors.
In contrast, GDP growth was 8.1 per cent during the same period last year. The research firm said the policy trade-offs had become more challenging as the economy faces stagflation, and that while the RBI’s growth and inflation forecasts may see significant downward or upward revisions, an immediate rate cut would be difficult to justify.
The MPC members include Nagesh Kumar, Director and Chief Executive of the Institute for Studies in Industrial Development in New Delhi; Saugata Bhattacharya, Economist; Ram Singh, Director at the Delhi School of Economics; Rajiv Ranjan, Executive Director at RBI; Michael Debabrata Patra, RBI Deputy Governor; and Shaktikanta Das, RBI Governor.
Follow us
