The Reserve Bank of India (RBI) gears up for a three-day Monetary Policy Committee (MPC) meeting commencing on December 6, with prevailing expectations that the central bank will sustain the existing status of the repo rate at 6.5%. Anticipated for the fifth successive occasion, the MPC is likely to maintain interest rates, influenced by a positive upswing in GDP growth in the July-September quarter and a diminishing trend in core inflation.
Parijat Agrawal, Head of Fixed Income at Union Asset Management Company, “anticipates a positive policy outlook with an improved domestic macro environment and favorable external factors. With Q2 FY24 GDP exceeding expectations, he expects the RBI to revise upward its full-year projections. Factors like a significant correction in the US 10-year, stable oil prices around $80, and the emphasis on controlling inflation to the 4% target suggest the MPC will likely maintain a pause on rates and stance. Market attention is expected on guidance regarding systemic liquidity, Open Market Operations (OMO), and insights into the retail/unsecured credit environment.”
Prasenjit Basu, Chief Economist at ICICI Securities, stated, “Given the moderation of CPI inflation to 4.87% YoY in Oct 23 (with core CPI at 4.5% YoY), we anticipate the RBI maintaining the policy repo rate in the upcoming MPC meeting. The easing inflationary pressure is likely to prompt a shift in the MPC’s policy stance from the previous ‘withdrawal of accommodation’ to a neutral position.”
Madhusudan Sharma, Executive Director of Bharat Housing Network, a housing credit platform and infrastructure for affordable housing, expressed, “The Reserve Bank of India (RBI) is likely to maintain current interest rates in the upcoming monetary policy review, given the controlled inflation. With a focus on supporting accelerating GDP growth, this favorable stance is expected to positively impact the housing sector, foreseeing sustained robust demand for home loans across various segments. Furthermore, the sector is poised to receive a boost from anticipated supportive policy measures, particularly in rural and semi-urban areas.”
Umesh Revankar, Executive Vice Chairman of Shriram Finance, noted “the RBI’s positive observations in the November bulletin but highlighted recent measures, including increased risk weights on consumer credit, signaling a vigilant stance on inflation. Despite encouraging inflation numbers, he aligns with the RBI’s cautious outlook and anticipates the MPC maintaining the repo rate at 6.5%, aiming to stabilize inflation around the 4% target. No rate cuts are expected until the beginning of the next fiscal year, with temporary impacts on MSME on-lending due to recent regulatory measures.”
