RBI October monetary policy meeting: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) started its three-day meeting on Monday, led by Governor Shaktikanta Das, deliberating interest rates and analysing the state of the economy, amid a volatile global economic backdrop. The six-member committee entrusted with the task of setting India’s benchmark interest rate started its deliberations on September 7 and the meeting will end on September 9.
The October meeting is the fourth after the new financial year started from April 1. The central bank conducts six bi-monthly meetings each financial year to discuss interest rates, inflation outlook and other macroeconomic indicators. This fiscal, the RBI MPC met on April 3-5, June 5-7 and August 6-8. After the October meeting, the committee will again meet on December 4-6 and then on February 5-7. The MPC meets invariably for 3 days before announcing its decision at the end of the 3-day period.
Governor Shaktikanta Das will announce the committee’s decision on September 9 at around 10:00 am. Stay tuned to FinancialExpress.com for minute-by-minute coverage and a thorough analysis of the RBI decision.
An introduction to six-member monetary policy committee
Earlier this month, the Centre had appointed three new members to the RBI’s monetary policy panel. The three external members of the six-member committee are routinely nominated and appointed by the central government. The new members are Saugata Bhattacharya, Economist; Dr Nagesh Kumar, Director and Chief Executive, Institute for Studies in Industrial Development; and Professor Ram Singh, Director, Delhi School of Economics, University of Delhi. The three members will hold office for a period of four years.
The new members will join internal members which include Chairperson Shaktikanta Das, RBI Deputy Governor in charge of monetary policy Michael Debabrata Patra and Executive Director monetary policy department of RBI Rajiv Ranjan.
The three members replaced Shashanka Bhide, Ashima Goyal, and Jayanth R Varma as the external members.
When and Where to Watch
In order to check announcements from the RBI MPC, you can refer to the following sources:
-RBI Press Releases: Regular updates and detailed press releases are available on the Press Release section of the RBI website.
-Financial News Websites and TV Channels: Major financial news platforms, including FinancialExpress.com, report the minute-by-minute announcements by the RBI MPC.
-RBI’s Social Media Channels: The RBI’s official social media profiles on platforms like X (formerly Twitter) and LinkedIn, may share key updates and announcements related to MPC meetings.
-Government Websites and Portals: Websites such as the Ministry of Finance or economic research portals often reference or provide links to RBI MPC announcements.
What to expect?
Per economists, the RBI is likely to maintain the status quo and remain on hold for the tenth consecutive MPC, keeping the repo rate unchanged at 6.50 per cent. Mandar Pitale, Head Treasury, SBM Bank India, said, “MPC has persistently advocated a restrictive policy until inflation aligns durably towards the 4 per cent target. With the unfavourable base effect taking the next couple of CPI prints near 5 per cent plus or minus, it will pose a major challenge for MPC to start easing from the October meeting. Also, the present easy financial condition is well aligned to a gradual progression on “Change of Stance” in future and may not need MPC to announce the change in the present stance of “withdrawal of accommodation” during the October meeting.”
Even as the US Federal Reserve recently delivered a 50 bps interest rate cut, bringing its policy rate down to 4.75-5 per cent for the first time in four years, the RBI is still believed to maintain policy rates unchanged. The RBI governor has also repeatedly clarified that RBI actions are based on domestic factors. Suman Chowdhury, Executive Director & Chief Economist, Acuité Ratings & Research, said, “With the US Federal Reserve delivering an outsized 50 bps cut in Sept’24, the expectation of a rate cut or a change in tight monetary stance by RBI MPC has clearly increased in the near term among the market forecasters. Some of them have predicted that RBI will pivot in the upcoming MPC meet itself. In our opinion, the current circumstances are not really conducive for RBI to opt for any affirmation action towards an easier monetary policy. While the fear of the inflation “elephant” may have subsided with the CPI headline print well within 4.0 per cent over the last two months and a favourable monsoon, the concerns around the stability of food inflation still linger among policy makers.”
He further added that the sudden escalation of the chronic geo-political conflict in West Asia with a direct confrontation between Israel and Iran which has the potential to spike global oil prices and raise the uncertainty around the inflation outlook, does not look encouraging as well. “We expect RBI MPC to opt for the “wait and watch” mode till Dec’24 or even longer till Feb’25 if the inflationary expectations don’t settle down. However, the central bank may keep the system liquidity at a comfortable level to ensure there is no volatility in the prevailing interest rates,” he said.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, added, “Growing geopolitical concerns, particularly in the Middle East, adds to inflationary concerns that can emerge from its impact on crude prices. Despite elevated interest rates, India’s economic growth has remained resilient, with consumption indicators such as home sales maintaining robust momentum. This sustained growth provides adequate cushioning for the RBI to keep the repo rate at the existing level of 6.5 per cent. Additionally, the imbalance between credit and deposit growth, where credit growth has outpaced deposit growth, may prompt the RBI to keep policy rates tightened, keeping it unchanged for an extended period.”
Deepak Agrawal, CIO – Debt, Kotak Mahindra AMC, reiterated, “With India’s consumer inflation at 3.65 per cent in August and food inflation at 5.66 per cent, factors like favorable monsoon conditions and lower global food prices could mitigate inflation pressures, suggesting the pitch is turning. Despite moderating GDP growth and a recent dip in the manufacturing PMI, the MPC is expected to maintain the current benchmark rate of 6.50 per cent while shifting its stance from “withdrawal of accommodation” to “neutral,” indicating a crucial inflection point in policy.” He further added that a rate cut cycle may commence in December 2024, contingent on clearer insights into the harvesting season and upcoming GDP data.