RBI Monetary Policy: Key Information To Be Aware Of, Shaktikanta Das To Announce Decisions Today

Reserve Bank of India Governor Shaktikanta Das is scheduled to unveil the bi-monthly policy today, February 8, and it is anticipated that there will be a prolonged pause on the key interest rate as inflation stays close to the upper tolerance threshold of 6%.

The Monetary Policy Committee (MPC), led by Governor Das, began its three sessions of discussion on Tuesday, February 6.

The MPC is charged with setting the policy repo rate with the goal of growth in mind in order to meet the inflation target.

Time of the RBI Monetary Policy

At ten in the morning, Das will unveil the monetary policy.

Repo Rate

The Reserve Bank has maintained the short-term lending rate, often known as the repo rate, at 6.5% for a duration of one year.

In order to control inflation, which is mostly driven by changes on a worldwide scale, the benchmark interest rate was last increased in February 2023, from 6.25 percent to 6.5% percent.

The inflation rate

Although it is still high and was 5.69 percent in December 2023, retail inflation in the current fiscal year has decreased from its top of 7.44 percent in July 2023. Nevertheless, it is still within the Reserve Bank’s comfort zone of 4-6 percent.

Expected Pause

According to a study by State Bank of India (SBI), the RBI is anticipated to maintain its halt position in future policies.

It said that “strong US non-farm payroll data and wages seem to have pushed back on market expectations for a quick pivot to rate cuts” and that “the best bet right now” seems to be a rate decrease from June to August.

The government-owned institution also anticipates that the RBI would stick to its policy of removing accommodation.

SBI said that it anticipates the CPI to be between 4.6% and 4.8% in the next fiscal year (2024–25) and 5.4% to 5.4% in 2023–24.

Experts from a variety of fields believe that the central bank will not adjust the repo rate, which is presently 6.5%, for the sixth consecutive time, mostly because of worries about inflation.

The government has directed the central bank to maintain retail inflation, which is based on the Consumer Price Index (CPI), at 4% with a 2% margin of error.

The MPC increased the policy rate by 40 basis points at an off-cycle meeting in May 2022. Thereafter, rate rises of differing magnitudes were implemented in each of the next five sessions until February 2023.

Between May 2022 and February 2023, there was a total increase of 250 basis points in the repo rate.

Members of the RBI MPC

Three individuals from outside the MPC and three RBI officials make up the group.

Ashima Goyal, Jayanth R. Varma, and Shashanka Bhide are the panel’s external members. In addition to Governor Das, Michael Debabrata Patra, the Deputy Governor, and Rajiv Ranjan, the Executive Director, are the additional RBI representatives in the MPC.