Mumbai (Maharashtra) [India], April 2 : The Reserve Bank of India will hold its first three-day monetary policy review meeting of 2024-25 starting Wednesday and the outcome of the meeting will be announced on Friday morning.
The RBI typically conducts six bimonthly meetings in a financial year, where it deliberates interest rates, money supply, inflation outlook, and various macroeconomic indicators. The other five meetings are scheduled for June 5-7, 2024; August 6-8, 2024; October 7-9, 2024; December 4-6, 2024; and February 5-7, 2025.
The Monetary Policy Committee of the Reserve Bank of India (RBI) in its February review meeting unanimously decided to keep the policy repo rate unchanged at 6.5 per cent, thus maintaining status quo for the sixth straight time.
The repo rate is the rate of interest at which RBI lends to other banks.
Deliberating the policy statement in February after a three-day review meeting, RBI Governor Shaktikanta Das attributed comfortable inflation and firm growth dynamics as the reasons behind maintaining the status quo the policy stance.
Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well.
"The MPC is unlikely to act on policy rates on April 5th. Even though rate cuts can be expected this year, the time is not yet conducive for a rate cut," said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Vijayakumar argued that a rate cut is not warranted now, given India's firm economic growth forecast.
Barring the latest pauses, the RBI raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
Retail inflation in India is in RBI's two-six per cent comfort level but is above the ideal 4 per cent scenario. In February, it was 5.09 per cent.
According to SBI Research, the Reserve Bank of India (RBI) might initiate a rate cut cycle in the third quarter of current financial year 2024-25.
Given that the RBI Governor has been highlighting the aim of getting inflation to 4 per cent on a durable basis, the policy rates are likely to be kept on hold in the upcoming policy meeting, asserted CareEdge Ratings ahead of the meeting.
S&P Global Ratings forecast rate cuts of up to 75 basis points (100 basis points is equal to 1 percentage point) in India by its central bank in the financial year 2024-25.
With both retail and wholesale inflation figures remaining at a manageable level, Morgan Stanley expects the Reserve Bank of India to start cutting rates from June 2024.
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