RBI’s Monetary Policy: Repo Rate Unlikely to be Changed
The Reserve Bank of India’s (RBI) upcoming Monetary Policy Committee (MPC) meeting, scheduled from October 4 to 6, is expected to maintain the repo rate at 6.5 percent for the fourth consecutive time. The decision is driven by concerns about persistent consumer price index (CPI) inflation and various domestic and global economic challenges.
Inflation and Economic Challenges
- The RBI’s decision to keep the repo rate unchanged is influenced by high inflation, which stood at 6.83 percent in August.
- Domestic challenges include food inflation, an uneven monsoon affecting crops, higher interest rates, and rising global crude oil prices.
Economic Growth Forecast
- The RBI is unlikely to revise its GDP growth forecast, currently at 6.5 percent for FY24.
- Economic headwinds, including uncertainties related to a weak monsoon and global economic conditions, warrant a cautious approach.
- While inflation projections for the second quarter and FY2024 may be revised, it is not expected to be significant.
- Food inflation is expected to moderate in the coming quarters, despite rising global crude oil prices.
- The RBI is unlikely to announce specific liquidity measures, given the current tight liquidity conditions.
- The gradual rollback of the incremental cash reserve ratio (I-CRR) and liquidity management operations will support money market conditions.
Category: Economy & Banking Current Affairs - 2024