The bi-monthly review meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India, which decides on the policy interest rate, started on Wednesday.
In the meeting lasting three days, RBI’s MPC will take a decision regarding the repo rate. The decision of the MPC, headed by Reserve Bank Governor Shaktikanta Das, will be announced on Friday.
This is the first bi-monthly monetary policy review for the financial year 2024-25. The committee headed by Governor Das also includes Shashank Bhide, Ashima Goyal, Jayant R Verma, Rajeev Ranjan and Michael Debabrata Patra.
A total of six MPC meetings will be held in the new financial year starting from April 1.
No change from February 2023
It is expected that RBI will once again keep the key policy rate repo unchanged and maintain its focus on controlling inflation.
As concerns over economic growth rate subside, the focus is expected to remain on retail inflation.
RBI last increased the repo rate in February 2023 and since then it has remained constant at 6.5 percent. There was no change in the repo rate in the last six bi-monthly policies.
Good signs from other countries
Experts said that in the MPC meeting, attention may be given to the stance of central banks of some major economies like America and Britain. These central banks are currently in a ‘watch and wait’ position regarding interest rate cuts.
At the same time, Switzerland has become the first major economy to cut interest rates, while Japan, the world’s third largest economy, has recently ended the streak of negative interest rates.
Reduction expected in third quarter
Everyone’s eyes are on the change in rates. However, State Bank of India has said in its research report that there is no possibility of rate cut in the upcoming meeting.
According to SBI, RBI may announce the first cut in the third quarter of financial year 2025.
projections on inflation
The government has asked the RBI to ensure that retail inflation remains at four percent with a variation of two percent.
The retail inflation rate in the month of February was 5.1 percent. The SBI report says that the inflation rate is expected to decline till July, but after that it will increase to a peak of 5.4 percent in September, after which it will decline. The retail inflation rate for the entire financial year 2025 is likely to be an average of 4.5 percent.