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

India's Q3 GDP growth rate of 7.6% surpasses expectations and projections, but RBI is expected to maintain a hawkish stance on repo rate in December.

Sharmila Bhadoria
Updated1 Dec 2023, 11:47 PM IST
Despite an upswing in GDP numbers, RBI's monetary policy committee is likely to keep the repo rate unchanged in December, said Barclays in its report
Despite an upswing in GDP numbers, RBI’s monetary policy committee is likely to keep the repo rate unchanged in December, said Barclays in its report(Mint)

India's GDP growth rate of 7.6% for the July-September quarter surpassed the market expectations along with projections made by the Reserve Bank of India. However, strong GDP numbers are unlikely to deter RBI from its hawkish stance on the repo rate in December. RBI's Monetary Policy Committee (MPC) is likely to remain on a cautious hold and keep the repo rate unchanged at 6.5%, according to Barclays. 

Apart from continuing its hawkish stance on the repo rate, the central bank may highlight risks to inflation from a potential recurrence of food price shocks and its impact on inflation expectations despite cooling core inflation, notes Barclays in its December MPC review.

With positive Q3 FY24 GDP print numbers, the RBI is expected to be less concerned over the growth momentum. The central bank may also raise its annual growth forecast modestly, but keep the inflation forecasts unchanged.

"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," said Barclays in its report. 

Focus on liquidity management and credit growth

In its upcoming meeting, the RBI is likely to maintain its focus on liquidity management and credit growth. Barclays report underlined RBI's disinterest in tightening liquidity excessively in the present scenario. 

“We think the bank will likely want to avoid a relapse of the WACR below/ around the repo rate due to excess liquidity conditions, which implies it will continue to conduct two-way operations as needed,” stated Barclays in its report.

Bank credit growth continues to be at elevated levels, mainly due to personal loans, which are growing around ~30% y/y. Governor Das had flagged this rapid growth in the October MPC meeting, advising banks and non-banking financial companies (NBFCs) to strengthen their internal surveillance mechanisms and address the build-up of risks.

 

Catch all the Business News , Economy news , Breaking News Events andLatest News Updates on Live Mint. Download TheMint News App to get Daily Market Updates.

MoreLess
First Published:1 Dec 2023, 11:47 PM IST
Business NewsEconomyRBI to remain cautious on inflation, keep the repo rate unchanged at 6.5% in December, says Barclays

Get Instant Loan up to ₹10 Lakh!

  • Employment Type

    Most Active Stocks

    Adani Power share price

    560.20
    03:59 PM | 28 NOV 2024
    36.4 (6.95%)

    Adani Ports & Special Economic Zone share price

    1,167.00
    03:43 PM | 28 NOV 2024
    -32.75 (-2.73%)

    Indian Oil Corporation share price

    137.80
    03:59 PM | 28 NOV 2024
    -1.15 (-0.83%)

    Adani Enterprises share price

    2,437.45
    03:59 PM | 28 NOV 2024
    39.1 (1.63%)
    More Active Stocks

    Market Snapshot

    • Top Gainers
    • Top Losers
    • 52 Week High

    Amber Enterprises India share price

    5,991.45
    03:56 PM | 28 NOV 2024
    -481.35 (-7.44%)

    SBI Life Insurance Company share price

    1,427.95
    03:55 PM | 28 NOV 2024
    -77.55 (-5.15%)

    Max Financial Services share price

    1,128.60
    03:29 PM | 28 NOV 2024
    -59.3 (-4.99%)

    Triveni Turbines share price

    796.55
    03:58 PM | 28 NOV 2024
    -38.75 (-4.64%)
    More from Top Losers

    Honasa Consumer share price

    251.55
    03:54 PM | 28 NOV 2024
    22.85 (9.99%)

    ITI share price

    295.40
    03:56 PM | 28 NOV 2024
    19.65 (7.13%)

    Adani Power share price

    560.20
    03:59 PM | 28 NOV 2024
    36.4 (6.95%)

    Ujjivan Small Finance Bank share price

    35.88
    03:59 PM | 28 NOV 2024
    2.32 (6.91%)
    More from Top Gainers

    Recommended For You

      More Recommendations

      Gold Prices

      • 24K
      • 22K
      Bangalore
      77,535.000.00
      Chennai
      77,541.000.00
      Delhi
      77,693.000.00
      Kolkata
      77,545.000.00

      Fuel Price

      • Petrol
      • Diesel
      Bangalore
      103.02/L0.00
      Chennai
      100.90/L0.00
      Kolkata
      104.95/L0.00
      New Delhi
      94.77/L0.00

      Popular in Economy

        HomeMarketsPremiumInstant LoanMint Shorts