RBI MPC Meet Live Updates: Will RBI maintain status quo on rate cuts? All eyes on inflation commentary

RBI MPC Meeting Live News Updates: RBI Governor Shaktikanta Das is set to announce the monetary policy decisions today, with widespread expectation that the benchmark interest rates will remain stable. This development occurs shortly after the BJP relinquished its parliamentary majority, necessitating power-sharing within a coalition government.

The benchmark repo rate is currently at 6.50 percent with a “withdrawal of accommodation” stance.

As per economists, there’s a risk a BJP-led government may veer from its fiscal path by raising welfare spending to shore up support, an approach that may stoke inflation that’s already above the RBI’s target.

RBI will “have to watch the fiscal outcome of the next month’s budget now more closely before considering the monetary policy path,” Citigroup Inc. economists Samiran Chakraborty and Baqar Murtaza Zaidi told Bloomberg. “A status quo in the June policy is an even more likely outcome with the focus on reducing volatility in uncertain times.”

Das will reveal the decision at 10 in the morning following deliberations by the RBI’s rate-setting panel, the Monetary Policy Committee (MPC), which commenced discussions on Wednesday.

Given the uptick in economic growth, experts suggest that the MPC is likely to abstain from implementing rate cuts, despite the persistent repo rate of 6.5 percent since February 2023.

A research paper by SBI indicates that the central bank should persist with its current accommodative stance.

The report, titled ‘Prelude to MPC Meeting,’ forecasts a repo rate cut in the third quarter of the ongoing fiscal year, with expectations of a modest rate reduction cycle.

Additionally, it anticipates consumer price index (CPI)-based retail inflation to hover around 5 percent in May (data awaited later this month) before easing to 3 percent in July. It projects inflation to remain below 5 percent from October through the end of 2024-25.

The government has tasked the Reserve Bank with ensuring retail inflation at 4 percent with a margin of 2 percent on either side. Retail inflation stood at 4.83 percent in April this year.

The MPC comprises three external members and three RBI officials. External members of the rate-setting panel include Shashanka Bhide, Ashima Goyal, and Jayanth R Varma.

RBI MPC Meet Live Updates: FAQs

What is repo rate?
The repo rate denotes the interest rate at which a nation’s central bank (such as the Reserve Bank of India for India) provides loans to commercial banks when there is a shortage of funds. It serves as a tool for monetary authorities to manage inflationary pressures.

What is reverse repo rate?
The reverse repo rate denotes the interest rate at which the country’s central bank (in the case of India, the Reserve Bank of India) borrows funds from commercial banks domestically. This mechanism serves as a tool of monetary policy, enabling the regulation of the money supply within the nation.

What is Standing Deposit Facility?
The RBI employs the Standing Deposit Facility as a collateral-free mechanism to absorb surplus liquidity from banks through interest payments.