RBI Set to Announce Interest Rate Decision Today at 10:00 AM

The RBI (Reserve Bank of India) will declare its decision on the interest rate today at 10 AM. The announcement follows a 3-day meeting of the Monetary Policy Committee (MPC), chaired by Governor Shaktikanta Das.

Economists foresee that the central bank will maintain the repo rate at 6.5%, unchanged since February 2023. Some adjustments to the Cash Reserve Ratio (CRR) could be considered, given the current economic challenges of high inflation and slow GDP growth.

Current Repo Rate and Inflation Target

The RBI has kept the repo rate steady at 6.5% for nearly 2 years. Its mandate is to maintain inflation at 4%, allowing for a 2% margin on either side. Between May 2022 and February 2023, the Reserve Bank of India (RBI) raised the repo rate by 250 basis points to address escalating inflation.

This meeting is significant as it marks the final MPC meeting chaired by Governor Das in his current term, set to end on December 10.

MPC Members

The 6-member MPC includes experts like Nagesh Kumar, Saugata Bhattacharya, Ram Singh, Rajiv Ranjan, Michael Debabrata Patra, and Shaktikanta Das.

Key Highlights from the RBI MPC Meeting

• Economic Growth Slows, CRR Cut Expected

The RBI might reduce the Cash Reserve Ratio (CRR) to ease monetary conditions following a slowdown in economic growth, analysts suggest. India’s GDP growth dipped to 5.4% in the July-September quarter of this fiscal, the lowest in nearly 2 years, driven by weak performance in manufacturing and mining.

• CRR Cut Likely to Inject Liquidity

Reducing the CRR, which is the percentage of deposits banks must hold in cash, by 50 basis points to 4% is seen as a possibility between December 2024 and February 2025. This move could release ₹1.1 trillion ($12.98 billion) into the banking system, encouraging lending and lowering market interest rates without altering the repo rate.

• Inflationary Pressures Persist

Retail inflation, primarily driven by rising food prices, rose to 6.21% in October, exceeding the RBI’s 6% upper tolerance limit. Inflation had been below this limit since September last year but peaked at 6.83% in August 2023.

• Uncertainty Looms Over Policy Decisions

While a CRR cut could boost liquidity, the RBI may hold off on reducing the repo rate immediately due to persistent inflationary pressures and mixed economic signals.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.