The Monetary Policy Committee meeting of the Reserve Bank of India has begun on Monday against the backdrop of retail inflation remaining below the mandated 6 per cent upper limit and a projected slowdown in GDP growth in the next fiscal. After three days of deliberation, the rate-setting committee led by RBI governor Shaktikanta Das will announce its decision on Wednesday. ALSO READ: RBI monetary policy December 2022 review highlights: Indian economy is resilient: Governor Das
The meeting comes just a week after the Union finance minister presented Narendra Modi’s government’s budget to parliament. Thus, people are now eagerly anticipating MPC meeting decisions to understand about RBI’s future outlook for the country’s economy. Here we have listed expectations from Economy experts:
1. Experts anticipate a smaller 25 basis point rate increase or a pause in the rate hike spree that began in May last year to combat inflation which remained above upper tolerance level for the three consecutive quarters starting January 2022.
RBI is mandated to keep retail inflation below 4 per cent with a margin of 2 per cent. However, the retail inflation based on Consumer Price Index (CPI) in November and December fell below 6 per cent.
2. Economists at SBI said they expect RBI to halt interest rate hike. “We expect the RBI to pause in February policy,” State Bank of India’s Economic Research Department stated in a report titled ‘Prelude to MPC Meeting on Feb 6-8, 2023’.
3. Experts say lending rates have largely tracked the actions of developed-country monetary authorities. The SBI note also stated that future rate hikes by the US Federal Reserve, which was one of the factors that compelled RBI to raise rates in the past, may be smaller in magnitude.
4. According to Chief Economist at Bank of Baroda, Madan Sabnavis, the credit policy will be announced in the context of both the Budget and the Economic Survey. He added that the budget has maintained a virtually unchanged borrowing programme, while the survey indicates that higher interest rates will persist in the coming year.
“RBI will pitch for another 25 bps hike in the repo rate which will be the last in this cycle, and then pause,” Sabnavis told PTI.
5. Sabnavis is of opinion that, while inflation has been declining, core inflation has a tendency to remain sticky. He says the lower inflation is primarily due to lower food inflation, which can be volatile. As a result, and because the RBI’s decision cannot be reversed so soon, he believes in another hike.
(Inputs from wire)