In light of the lowering of retail inflation in April and the potential for further fall, experts predict that the Reserve Bank of India (RBI) will retain the policy repo rate at 6.5 percent during its next announcement on June 8.
Headed by Reserve Bank Governor Shaktikanta Das, a meeting of the 6-member Monetary Policy Committee (MPC) is scheduled for June 6-8. The decision of the 43rd meeting of the MPC would be announced on Thursday, June 8.
The RBI halted its rate hiking cycle and maintained the 6.5 percent repo rate following the most recent MPC meeting in April. Prior to that, the central bank has raised the repo rate by a total of 250 basis points since May 2022 in an effort to keep inflation under control.
The MPC is meeting in the backdrop of consumer price-based (CPI) inflation declining to an 18-month low of 4.7 per cent in April. The Reserve Bank governor recently indicated that the May print would be lower than the April numbers.
The CPI for May is scheduled to be announced on June 12. Madan Sabnavis, Chief Economist, Bank of Baroda, said the RBI is most likely to continue to pause on the interest rates and retain repo rate at 6.5 percent.
"The reason is that inflation has come in lower than 5 percent in April and will be even lower in May. This being the case, the view would be that past repo rate actions have had an effect on inflation and hence there can be another pause taken," he said.
The policy stance, he added, will however remain with withdrawal of accommodation since there has already been an increase in liquidity as deposits increase due to the announcement of the exchange of the Rs 2,000 notes.
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