RBI Governor Shaktikanta DasImage Credit source: Reuters
The Monetary Policy Committee of the Reserve Bank of India is about to start a meeting that will last for three days from Tuesday. The second MPC meeting of the financial year will run from June 6 to 8 and the results of this meeting will be announced on June 8. According to the experts, due to the coolness of inflation at present, there is no possibility of much confusion regarding the policy rate. According to experts, the policy rate panel can freeze interest rates for the second time in a row. At present, the repo rate is at 6.5 percent.
If we talk about retail inflation, then in the month of April, it came down to the lowest level of 18 months at 4.7 percent and in the month of March the same inflation was at 5.6 percent. This means that the level of inflation in the country has been below the high band of the tolerance level of RBI. In the MPC meeting held in the month of April, the RBI MPC pressed the pause button on the rate hike cycle without changing the repo rate at 6.50 per cent. Which is expected to remain subdued this year. From May 2022 to February 2023, the repo rate has already increased by 2.50 percent.
pause button will be pressed
According to Indranil Pan, Chief Economist of Yes Bank, the recent GDP figures have given a lot of relief to the common people. Flexibility is being seen in the economy. Retail inflation has come down and it is expected that the moderation in inflation will continue. In such a situation, RBI will not change the repo rate even in the June cycle. At the same time, RBI can cut the repo rate next time. Pan said it also said that common people may have to wait till the February 2024 meeting for the deduction.
Inflation estimates may be lower
Meanwhile, Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India, also expects that the RBI will keep the repo rate unchanged and may press the pause button for a long time. In addition, they expect the central bank to lower inflation estimates for FY2024 and possibly revise GDP growth estimates. In April, the central bank had projected retail inflation for FY2024 at 5.2 per cent, while the GDP estimate for the year was 6.5 per cent.
SBI Research said inflation projections for FY24 could be downgraded and since growth remains strong, further GDP growth estimates can be expected to be upgraded. Meanwhile, according to the estimates released by the National Statistical Office (NSO), India’s real GDP growth for 2022-23 was 7.2 per cent, higher than the estimated 7 per cent.
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