The Reserve Bank of India began its high-powered rate-setting three-day Monetary Policy Committee meeting on August 8 headed by Governor Shaktikanta Das. The decision of the six-member Monetary Policy Committee (MPC) would be announced on Thursday, August 10, by Governor Das.
Overall, there is expectation that the Central Bank may maintain rates at current level given the borrowing cost, which started rising in May last year, has stabilised and the policy repo rate has been increased by 250 basis points since May 2022. However, its stance might be hawkish given the recent spike in tomato prices and prices of other essential food items.
The RBI in its last statement had said that it will be monitoring inflation numbers closely. Das in his statement after the last MPC on June 8 had outlined that “there is no room for complacency.” He had also highlighted that, “Therefore, close and continued vigil on the evolving inflation outlook is absolutely necessary, especially as the monsoon outlook and the impact of El Nino remain uncertain.”
Retail inflation based on Consumer Price Index (CPI) rose to a three-month high of 4.81 per cent in June, mainly on account of higher food prices. Though it is within RBI’s comfort level of below 6 per cent, it remains to be seen if there are any spillover impact in inflation data for July, which will be released on August 14.
RBI rate action in FY23
The last MPC meeting was held on June 6-8 and the Central Bank had decided unanimously to keep the policy repo rate unchanged at 6.50 per cent. The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
The Monetary Policy Committee (MPC) had met in April before that to assess the macroeconomic situation and decided unanimously to keep the policy repo rate unchanged at 6.50 per cent.
In the last quarter of FY23, on February 8, the RBI increased the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.50 per cent.
Before that at the December, 2022 meeting, the MPC has increased the policy repo rate under the liquidity adjustment facility (LAF) by 35 basis points to 6.25 per cent. The MPC had increased the repo rate by 50 basis points in August 2022 and before that even in June 2022, policy rates had seen 50 bps uptick. There was no hike in the MPC meeting in April 2022.