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Chennai, June 6 The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) may not remove its finger from the repo rate pause button it had hit in April 2023, said experts there by ruling out the possibility of a rate reduction."It is unlikely that the RBI will precede the Fed (US Federal Reserve) in reversing its course of rate hikes. However, MPC may soften its tone, on net amid (1) improving domestic inflation outlook (and a possible downward revision in its forecast), (2) improving external sector dynamics and (3) ongoing monetary-policy lags of past hikes," Madhavi Arora, Lead Economist, Emkay Global Financial Services said.According to Arora, the upcoming MPC policy is unlikely to differ much from that in April 2023, hinging its reaction function to a fluid global situation and domestic growth-inflation backdrop, and retaining policy flexibility."The policy tone will likely be balanced yet non-committal, with no change in the stance, thus adding to its inflation-fighting credibility," she added."The MPC will not change the repo rate. The inflation is less than five per cent and will be in the coming months," Chief Economist Madan Sabnavis, Bank of Baroda, told .The consumer price index (CPI) inflation moderated in April'23 to 4.70 per cent year-on-year (YoY) and remained within the RBI's target range (2-6 per cent) for the second consecutive month.Adding further Sabnavis said the liquidity has increased and so the RBI-MPC's stance will also not change.On the other hand, the MPC may lower inflation forecast marginally, Sabnavis said.Pointing out the fall in CPI and WPI inflation, Parijat Agrawal, Head-Fixed Income, Union Asset Management Company said the drivers of inflation have softened and high interest rates and tighter financial conditions are working their way through economies."Going ahead we expect this trend to continue, falling close to the target 4 per cent in time.A There are visible signs that economic activity globally is moderating. Our economy has shown resilience amidst multiple challenges. In such a scenario it is expected that MPC will pause for an extended period of time and there will be no change in policy rate or stance. Monsoon will remain a key monitorable," Agrawal added.Experts also expressed concern at the likely impact of El Nino on the economy and urged the government to forecast the same."Accurately forecasting the potential impact of El Nino on the economy has become the primary concern. Considering our economy's heavy dependence on farmers and small businesses, we feel that the Government would do well to take steps to mitigate the adverse effects of El Nino," said Parag Sharma, Whole-time Director & Chief Financial Officer, Shriram Finance."With the customer inflation level at 4.7 per cent, well below RBI's upper tolerance limit of 6 per cent, the conditions seem favourable for a pause in rate hikes. The latest GDP forecasts also point towards inflation becoming less of a concern. Accordingly, we expect that the MPC, in its upcoming meeting, will hit the pause button on the policy rate hikes, for the second time running. However, accurately forecasting the potential impact of El Nino on the economy has become the primary concern. Considering our economy's heavy dependence on farmers and small businesses, we feel that the Government would do well to take steps to mitigate the adverse effects of El Nino."From the real estate sector perspective Rajan Bandelkar, President, NAREDCO said the interest rates has to be lower to encourage potential buyers to take on loans for property purchases; this can boost the overall real estate market activity."We expect the RBI to ensure adequate liquidity in the banking system. Sufficient liquidity can enable banks to provide loans and financing options to developers and buyers, thereby supporting the growth of the real estate sector," Bandelkar said.vj/ksk/Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

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