Reserve Bank’s Monetary Policy Committee starts deliberations, decision on October 9

Mumbai: The reconstituted rate-setting panel of the Reserve Bank on Monday started deliberations on the next bi-monthly monetary policy amid expectations of a status quo on interest rates in view of inflationary concerns and the possibility of a flare-up in the Middle East crisis that could jack up commodity prices.

In the current context, experts feel that the RBI may not follow the US Federal Reserve, which lowered the benchmark rates by 50 basis points, and the central banks of some developed nations, which have reduced the interest rates.

Earlier this month, the government reconstituted the Monetary Policy Committee (MPC).

It has appointed Ram Singh, Saugata Bhattacharya, and Nagesh Kumar as external members of the MPC. They have replaced Ashima Goyal, Shashanka Bhide, and Jayanth R Varma.

Apart from Governor Shaktikanta Das, the other internal members are the RBI Deputy Governor in charge of monetary policy Michael Debabrata Patra and the Executive Director monetary policy department of RBI Rajiv Ranjan.

MPC Chairman Das will reveal the outcome of the three-day discussion on Wednesday (October 9).

The central bank has kept the repo or short-term lending rate unchanged at 6.5 per cent since February 2023, and experts think some easing could only be possible in December.

The government has tasked the central bank to ensure that Consumer Price Index (CPI) based retail inflation remains at 4 per cent with a margin of 2 per cent on either side.

“We expect the RBI to keep the policy repo rate (currently at 6.50 per cent) and stance (withdrawal of accommodation) unchanged in the upcoming October monetary policy meeting, though we feel strongly that the stance should be changed to neutral, considering the change in global rates cycle and potential risks to India’s growth momentum going forward,” said Kaushik Das, chief economist, India & South Asia,

Deutsche Bank.

The RBI is likely to keep its FY25 real GDP growth (7.2 per cent yoy) and CPI inflation (4.5 per cent yoy) forecasts unchanged in the October policy, though there could be changes made to the quarterly Consumer Price Index forecasts, particularly for July-September 2024, he added.