RBI Policy: MPC to begin bi-monthly monetary policy meeting today; repo rate decision on June 8; Here’s what to expect

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is set to begin its three-day meeting on Tuesday. The second bi-monthly monetary policy meeting of FY24 is being held from June 6 to 8 and its outcome will be announced on June 8.

As per the street consensus, the RBI Governor Shaktikanta Das-led rate setting panel will keep the repo rate unchanged at 6.5% amid cooling inflation in the country.

The retail inflation rate, based on the consumer price index (CPI) has come down to 4.7% in April, which is below the RBI’s upper tolerance limit of 6%. CPI inflation in March was at 5.66%.

In the last policy meet in April, RBI MPC had decided to hit a pause button on the rate hike cycle, keeping the key repo rate unchanged at 6.50%. Repo rates are already up 250 bps since May 2022.

Also Read: RBI’s policy rate pause is set to continue for long term

Economists largely expect that the evolving growth-inflation mix calls for a continued pause from the RBI in June.

“The upside surprise seen in the latest released GDP numbers Q4FY23 show that the economy is resilient even as private consumption expenditure remains on the slow track. YoY headline CPI inflation has come down and we anticipate the softening bias to continue. However, the more significant reason for the reduction in the CPI is the high base of last year,” said Indranil Pan, Chief Economist, Yes Bank.

While he expects the RBI to stay on a pause in June, he believes the next move would surely be a rate cut. 

“However, we might have to wait till around the February 2024 MPC meeting for this cut,” Pan added.

Meanwhile, Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India, also expects the RBI to keep the repo rate unchanged and go for a “prolonged pause”.

Read here: RBI Monetary policy: Pause in rate hike, other predictions by SBI Research

Moreover, he expects the central bank to downgrade inflation projections for FY24 and possibly upgrade GDP growth forecast.

In April, the central bank projected retail inflation to moderate to 5.2% in FY24, while GDP growth for the year was estimated to be at 6.5%.

SBI Research said inflation estimates for FY24 could be downgraded and as growth remains strong, the possibility of growth upgrade for FY24 looks imminent in June policy.

Meanwhile, India’s real GDP growth for 2022-23 stood at 7.2%, higher than the 7% projected, as per the latest estimates released by the National Statistical Office (NSO).

Sonal Badhan, Economist at Bank of Baroda also expects RBI to maintain status quo and keep the rates unchanged.

“We also expect no change in stance or any future rate hikes. In fact, we anticipate the earliest possible rate cut in October 2023. Downward revision to RBI’s CPI forecast for FY24 can be expected, by 10-20 bps. However GDP forecasts are estimated to remain unchanged,” Badhan said.

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