RBI Set to Decide on Interest Rates: What to Expect
RBI Set to Decide on Interest Rates: What to Expect

The Reserve Bank of India (RBI) is gearing up for its first Monetary Policy Committee (MPC) meeting of the new financial year, set to run from April 3 to April 5. Analysts anticipate the committee will likely maintain the current repo rate and continue with its stance of cautious monetary policy.

Since April 2023, the RBI has held the repo rate steady at 6.5% after a series of increases totaling 250 basis points between May 2022 and February 2023. In the most recent meeting held in February, the MPC opted to keep the repo rate unchanged at 6.5%, citing concerns over inflation. While five members favored maintaining the status quo, one member voted for a 25 basis point reduction in the repo rate.

The meeting is slated to commence at 10 am on Wednesday, with the RBI set to announce its policy review outcome on Friday, April 5th. Most analysts predict that the central bank will once again opt to keep the repo rate unchanged, although they emphasize the need for caution due to ongoing risks associated with food inflation, which could impact the consumer price index (CPI).

A research report from the State Bank of India suggests that rate cuts are unlikely during the upcoming MPC meeting. The report indicates that any potential rate cuts may only occur in the third quarter of the financial year 2024-25.

Commenting on the potential outcomes of the meeting, experts suggest that if the RBI shifts its stance to neutral, the accompanying statements and comments are likely to be hawkish. Conversely, if the central bank maintains its current stance of cautious monetary policy, the commentary may be less hawkish, aligning with the expectations of the majority of market participants.

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