RBI MPC Meeting Reserve Bank Of India Likely To Hold Repo Rates Over Inflation

RBI MPC Meeting: The monetary policy meeting of the Reserve Bank of India (RBI) is going to be held this week. In such a situation, the central bank can keep the interest rates on hold. However, in view of the increase in the prices of some food items, the rates can be discussed in detail. RBI’s monetary policy meeting is going to run from 8 to 10 August. In such a situation, whether the interest rate will increase or remain constant, will be confirmed after the meeting. ET reports, the Monetary Policy Committee of RBI is going to keep the repo rate unchanged at 6.50 per cent.

The MPC has increased the repo rate by a total of 250 basis points from May 2022 to February 2023 to deal with elevated inflation. While there was a sharp decline in the Consumer Price Index in March, April and May, prices have started rising in June. The prices of vegetables have increased very fast. Especially the price of tomato has registered a tremendous jump.

At the same time, this increase is expected to continue in July as well. Many experts estimate that the CPI inflation rate will be 6.0-6.5 percent as against 4.81 percent in June. And the tolerance band of the MPC for CPI inflation is 2-6 per cent. At the same time, there is likely to be a strong focus to manage the rest of the inflation rate. Experts say that the inflation rate is expected to remain above 6 percent.

The MPC, which has projected CPI inflation to be 5.1 per cent in FY20, sees the gauge at 5.2 per cent in the current quarter. In the April monetary policy report, the RBI projected average inflation for FY2025 to be 4.5 per cent. Experts said that if the central bank keeps the inflation forecast below 5 percent for the first quarter of the next financial year, then the market can put a long hold on interest rates.

The report said that excluding the volatile components of food and fuel, did not grow in June and remained well below the 5.5 per cent mark. On the other hand, due to increase in the prices of vegetables and pulses, the inflation rate is expected to reach the level of 6 percent. The fact is that other central banks are raising rates. In such a situation, RBI can try its best to keep the rates stable.

On the other hand, according to another expert, the time to move from stagnation to softening of rates will be inspired by domestic considerations. In particular, incoming activity indicators show signs of weakness while inflation nears the mid-point of the target range.

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