RBI Monetary Policy Meeting: Will the RBI hold interest rates but change its policy stance? Here's what 5 experts say | Mint
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Business News/ Economy / RBI Monetary Policy Meeting: Will the RBI hold interest rates but change its policy stance? Here's what 5 experts say
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RBI Monetary Policy Meeting: Will the RBI hold interest rates but change its policy stance? Here's what 5 experts say

RBI MPC may keep policy rates unchanged. Market participants appear curious to see what the RBI thinks about India's growth in the current financial year.

Investors, economists and experts will look for cues on rate cuts in the RBI Governor Shaktikanta Das speech after the policy meeting on December 8. (AP Photo/Rajanish Kakade) (AP)Premium
Investors, economists and experts will look for cues on rate cuts in the RBI Governor Shaktikanta Das speech after the policy meeting on December 8. (AP Photo/Rajanish Kakade) (AP)

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) will begin its three-day huddle to decide on India's monetary policy on Wednesday, December 6, with the outcome due on December 8.

The central bank is likely to keep policy rates unchanged keeping in mind the fact that retail inflation, despite moderation, is still above its 4 per cent target while the economic growth remains strong. Moreover, crude oil prices have been volatile and geopolitical risks loom.

Market participants appear curious to see what the RBI thinks about India's growth in the current financial year. Also, they will look for cues on rate cuts in the RBI Governor Shaktikanta Das' speech after the policy meeting on December 8.

Mint collated the views of five experts on the prospects of the December policy meeting. Here's what they said:

Also Read: US Fed, RBI gear up for their last policy meet of the year; will a pause continue? When to expect rate cuts?

Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays

With strong growth momentum, core inflation declining, and the global backdrop turning more benign, the RBI's policy optionality is widening. Still, we expect the bank to stay cautious, taking macroprudential steps to curb lending, while keeping an eye on supply shocks and potential second-order inflationary effects.

In its 8 December meeting, we expect the MPC to remain on a cautious hold and keep the repo rate unchanged at 6.5 per cent. The central bank may flag risks to inflation from a potential recurrence of food price shocks and its impact on inflation expectations, even as it draws comfort from the moderation in core inflation.

The MPC is likely to flag a moderation in the pace of monetary transmission, as spreads of lending rates over the repo rate have narrowed in the past few months. Accordingly, we expect the committee to maintain the monetary policy stance pointed towards a "withdrawal of accommodation" despite deficit liquidity conditions.

We think the RBI may raise its annual growth forecast modestly, but is likely to keep its inflation forecasts unchanged, citing uncertainty around the near-term outlook due to possible changes in domestic food and international energy prices.

Also Read: RBI to remain cautious on inflation, keep the repo rate unchanged at 6.5% in December, says Barclays

Prasenjit Basu, Chief Economist, ICICI Securities

With CPI inflation moderating to 4.87 per cent year-on-year (YoY) in October 2023 and core CPI inflation to 4.5 per cent YoY, we expect the RBI to keep the policy repo rate unchanged at its next MPC meeting.

The prospect of further easing in inflationary pressure is likely to result in the MPC moving to a neutral policy stance from the previous stance of “withdrawal of accommodation".

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Parijat Agrawal, Head – Fixed Income, Union Asset Management Company

We are going into the policy with an improved domestic macro environment and benign external factors. Q2FY24 GDP surprised on the upside, and therefore we expect RBI to revise the projections up for the full year.

The US 10-year has corrected meaningfully from the peak in line with the incoming data and the central bank narrative. Concerns around oil prices have reduced and have been close to around $80 for a few weeks now.

Although the MPC will emphasise bringing inflation to the 4 per cent target, we expect the MPC to remain on pause on rates and stance.

Markets will keenly look for guidance on systemic liquidity and open market operations (OMO). We may also hear a bit more about the retail/unsecured credit environment.

Also Read: The Reserve Bank must maintain its hawkish stance

Ranen Banerjee, Partner, Economic Advisory Services, PwC India

The two major factors that have changed since the last MPC meeting is inflation and growth prints. The inflation has moderated especially the core inflation but it is still above the 4 per cent targeted inflation rate though well within the plus minus 2 per cent range.

The surprising element has been the Q2 GDP print that has surprised everyone. The growth numbers will give comfort to the MPC and a continued pause becomes a certainty in this meeting.

The “withdrawal of accommodation" stance could have a difference of opinion within the committee but it is likely to be retained. In the event, we have a strong showing of the GDP in Q3 and the core inflation hits 4 per cent, we should not be ruled out a rate cut in late Q4 of FY23-24 or early Q1 of FY24-25 given the impending national elections and the US Fed also sending signals of possible rate cuts.

Also Read: RBI to maintain status quo on policy, raise GDP forecast: Mint poll

Shanti Ekambaram, whole-time director at Kotak Mahindra Bank

The Reserve Bank of India is likely to hold the key interest rates in its December monetary policy review and continue with its emphasis on containing inflation, which has shown encouraging trends over the past two months. Macroeconomic indicators remain healthy, with GDP growing at 7.6 per cent in Q2, exceeding expectations.

With economic growth continuing to be strong, the central bank will focus mainly on inflation, liquidity, and currency management. Given the global economic trends and geopolitical situation, expect RBI to keep its key rates and stance unchanged.

Also Read: RBI’s December policy review: Status quo to continue

Read all economy-related news here

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

 

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Published: 05 Dec 2023, 10:56 AM IST
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