RBI's MPC starts deliberations on policy rate, decision on Thursday

The Reserve Bank's rate-setting monetary policy panel began deliberations on Tuesday amid expectations that the central bank will keep the benchmark interest rates unchanged at 6.5 per cent on the back of easing retail inflation and the need to push economic growth.

Headed by Reserve Bank Governor Shaktikanta Das, the six-member Monetary Policy Committee (MPC) will meet for three days and the decision would be announced on Thursday, June 8.

After the last MPC meeting in April, the RBI paused its rate hike cycle and stayed with the 6.5 per cent repo rate. Prior to that the central bank had cumulatively hiked the repo rate by 250 basis points since May 2022 in a bid to contain inflation.

The MPC is meeting in the backdrop of consumer price-based (CPI) inflation declining to an 18-month low of 4.7 per cent in April. The Reserve Bank governor recently indicated that the May print would be lower than the April numbers. The CPI for May is scheduled to be announced on June 12.

On expectations from the MPC, Rumki Majumdar, Economist, Deloitte India said: ''We expect a pause in this meeting as growth concerns cannot be overlooked. With the global economy slowing down, there are risks that the slowdown contagion may impact us''.

Globally, there are signs that the Central Banks may also take a pause or go with fewer hikes as runaway inflation takes a breather, Majumdar said, and added this will further help the RBI to maintain the status quo.

Dhruv Agarwala, Group CEO, Housing.com said the RBI is expected to keep its benchmark lending rate unchanged, reflecting the easing concerns surrounding inflation.

''While some voices advocate for a rate cut to provide an impetus to growth, the RBI is likely to exercise caution and wait before contemplating such a step,'' he said.

He further said the robust GDP growth rate of 7.2 per cent achieved by the Indian economy in the financial year 2022-23 showcases its remarkable resilience in the face of global challenges.

The construction, trade, and hospitality sectors witnessed substantial double-digit expansion. These numbers also bode well for the real estate sector, with the government continuing to provide support to stimulate its growth, he added.

Pradeep Aggarwal, Founder and Chairman, Signature Global (India) too said the central bank is likely to maintain the status quo in policy rate.

''However, if there is an opportunity, we believe the apex bank should consider announcing a cut in policy rates, even if it is a small one. This could have a positive impact on consumer sentiment, benefiting the interest-sensitive real estate sector,'' Aggarwal said.

The actual decisions made by the RBI, will depend on various factors, including economic data, inflation trends, global economic conditions, and the prevailing challenges, experts said.

V Swaminathan, Executive Chairman, Andromeda loans and Apnapaisa.com said given the current circumstances, ''our expectation from the RBI is to refrain from raising policy rates, as it may negatively affect loan demand. We believe that, if not a cut, maintaining stable interest rates would be advantageous in supporting ongoing economic growth and fostering a conducive lending environment''.

The government has mandated the RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.

The other members of the MPC are: Shashanka Bhide (Honorary Senior Advisor, National Council of Applied Economic Research, Delhi); Ashima Goyal (Emeritus Professor, Indira Gandhi Institute of Development Research, Mumbai); Jayanth R Varma (Professor, Indian Institute of Management, Ahmedabad); Rajiv Ranjan (Executive Director, RBI); and Michael Debabrata Patra (Deputy Governor, RBI)