The Reserve Bank of India (RBI) on October 7 started its Monetary Policy Committee (MPC) meeting, which will conclude with Governor Shaktikanta Das announcing the rate decision on October 9. Meanwhile, borrowers, especially home loan customers, are keenly awaiting the MPC decision on the repo rate especially after the US Federal Reserve last month cut rates by half percentage point. So now the big question is whether there will be any change in the EMI of the home loan for borrowers.

According to experts, there is little chance of a cut in the repo rate in this RBI MPC meeting. This makes it clear that the EMI of your loan will neither increase nor decrease. They say that retail inflation is still a matter of concern and the growing crisis in West Asia may affect the prices of crude oil and other commodities.

Repo rate status

The RBI has kept the repo rate stable at 6.5% since February 2023. Experts believe that some rate easing is likely in December. The government has tasked the RBI with ensuring that Consumer Price Index (CPI)-based retail inflation remains at 4% (plus or minus 2%).

Also read: Regulatory requirements in top-up housing loans not being followed by certain entities, says RBI Governor

“Despite the US Fed interest rate reduction, we don’t anticipate RBI to follow suit, given the conscious uncoupling of monetary policy decisions between the US and other markets, including India,” Vivek Iyer, Partner, Grant Thornton Bharat said adding that inflation concerns persist, and the regulator will likely monitor the inflation trajectory’s sustainability before considering a rate cut.

Further, geopolitical tensions in West Asia pose supply-side risks, potentially impacting inflation, Iyer noted.

“As a result, we expect the regulator to maintain steady rates with no change in stance until the next MPC meeting. Home loan borrowers may expect a reduction of 25-40 basis points from lenders in the last quarter of this financial year, contingent upon a corresponding repo rate reduction,” Iyer said.

Anchoring inflation expectations is extremely important as that can become a self-fulfilling prophecy where inflation expectations will be built into business expectations and consumer expectations fueling more inflation despite muted CPI.

The RBI’s monetary policy will likely prioritize balancing inflation risks and growth objectives to maintain financial stability, leading us to expect steady rates, according to Iyer.

Comparison of RBI and Federal Reserve

Other experts also believed that the RBI will not follow the guidance of the US Federal Reserve, which recently reduced benchmark rates by 0.5%. The RBI will also not go along with the central banks of some other developed countries, which have cut interest rates.