Mumbai: Amid persistent domestic inflationary pressures and a looming emergency rate cut by the US Federal Reserve, the six member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) commenced its three day deliberations on Tuesday. The decision on rates will be announced on Thursday with the MPC likely to retain short term lending rates along with the withdrawal of accomodation stance as it remains determined to achieve the inflation target of 4 per cent.
“The fluidity of global narratives and policy repricing in conjunction with surplus banking liquidity, noisy food inflation back home and a still elusive 4 per cent inflation target, make it tricky for the RBI to find a balance in its policy biases,” said Madhavi Arora, chief economist at Emkay Global.
Last week, the US Fed signalled a rate cut was possible in September; the Bank of Japan, on the other hand, raised its key interest rate to 0.25 per cent from a range of zero to about 0.1 per cent. While the MPC is driven by domestic growth-inflation dynamics, experts said that it cannot remain immune to global developments.
The repo rate is the rate at which the RBI lends money to banks to meet their short-term funding needs. The RBI has hiked policy rates by 250 basis points between May 2022 and February 2023, since then it has kept the repo rate unchanged at 6.5 per cent. This will be the eighth consecutive time that the repo rate will remain unchanged.
RBI governor Shaktikanta Das has reiterated on multiple occasions the need to remain focused on bringing inflation towards the 4 per cent target on a sustained basis before shifting policy.
