Home / News / India /  RBI's 3-day MPC meet starts from today; all eyes on rate hike stance

The three-day Monetary Policy Committee (MPC) meeting of the Reserve Bank of India is set to commence from today. Financial markets will be keenly watching the committee's rate hike stance if any, as inflation is still above the 6 per cent target band.

The Reserve Bank of India (RBI) will come out with its next bi-monthly policy review on December 7 at the end of the three-day meeting of the MPC.

The central bank had already hiked the key policy rate by 190 basis points since May to 5.9 per cent to cool off domestic retail inflation that has stayed above the RBI's upper tolerance limit for over three quarters now. In October, retail inflation was 6.77 per cent as against 7.41 per cent the previous month, mainly due to easing prices in the food basket, though it remained above Reserve Bank's comfort level for the 10th month in a row.

As per economists polled by Reuters, the central bank will likely raise interest rates by a smaller 35 basis points, to 6.25 percent. The last three times the RBI has raised rates by 50 bps.

As per Madan Sabnavis, chief economist at Bank of Baroda, “The RBI will be presenting the monetary policy against the backdrop of GDP growth slowing down as well as inflation being high above 6 per cent. We do believe that the MPC will continue with rate hikes this time though the magnitude will be lower - probably 25-35 bps."

More specifically, Sabnavis said it believes that the terminal repo rate for the financial year is expected to be 6.5 per cent, which essentially means there will be one more rate hike in February meeting.

D K Pant, Chief Economist, India Ratings & Research, said the second quarter inflation and GDP numbers are in line with RBI's forecast.

"Inflation is likely to decline further. However, it is expected to remain higher than 6 per cent in this quarter. We believe RBI may go for a 25 bps hike in repo rate in December 2022 monetary policy," he said.

Also Read: RBI monetary policy: Why a 4th 50 bps repo rate hike can’t be ruled out?

SBI said in its latest research report has said, "We expect the RBI to hike rates in smaller magnitude in December policy attuned to emerging market central banks and the overall rate setting tone. A 35-bps repo rate hike looks imminent. We believe at 6.25%, it could be the terminal rate for now.…"

Also Read: Markets week ahead: Can RBI's policy outcome lead Nifty 50 to 19k?

Under the flexible inflation targeting framework introduced in 2016, the RBI is deemed to have failed in managing price rises if the CPI-based inflation is outside the 2-6 per cent range for three quarters in a row.

An out-of-turn meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India was held in early November to discuss and draft the report to be sent to the central government for having failed in maintaining the inflation mandate.

Also Read: RBI likely to moderate rate tightening

The meeting was called under Section 45ZN of the Reserve Bank of India (RBI) Act 1934, which pertains to steps to be taken if the central bank fails to meet its inflation-targeting mandate.

Further details about the special meeting are not officially in the public domain. 

(With inputs from agencies)

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less

Recommended For You

Trending Stocks

Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout