RBI MPC: Will The Fight Against Inflation Continue Or Will EMI For Common People Be Reduced?

RBI Governor Shaktikanta Das

The monetary policy meeting of the Reserve Bank of India will begin in a few hours. In which a decision will be taken on what is the stance of MPC on the repo rate. Will the RBI change the repo rate? Does this mean that interest rates will be cut? Or will the fight against inflation continue? If the RBI MPC members do not make any change in the repo rate for the ninth consecutive time keeping inflation in focus, then it will be interesting to see what is the attitude of the Reserve Bank Governor. In the last meeting, two members voted in favour of cutting interest rates. This time we may see an increase in this number.

However, in the month of May, there was a rise in inflation and the figure reached 5 percent. On the other hand, a rise in inflation was also observed. Inflation was also considered a serious problem in the Economic Survey. The main reason was said to be food inflation. In such a situation, the RBI may also address this issue once again. However, experts say that the RBI may take a decision to reduce interest rates in October or December. Some even say that interest rate cuts could begin from April 2025. There is no sign before that.

On the other hand, the RBI will also focus on the chances of a US recession. Due to which a huge fall was seen in the markets across the world. There was a huge fall in the global markets after the US employment data was released late last week. The first impact was seen in Japan. Where the yen was seen strengthening against the dollar. In fact, after 17 years, the Bank of Japan raised its interest rates twice to 0.25 per cent till July 31.

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On the other hand, last week the world’s largest central bank, the Federal Reserve may not have made any changes in the interest rates, but it definitely indicated that there may be some change in the interest rates in the month of September. Before that, the European Bank and the Central Bank of Canada had hiked the rate in the month of June. A few days ago the Bank of England has also cut the interest rates. In such a situation, there will be pressure on India to give its stance regarding the reduction of interest rates.

Let us tell you that there has been no change in the repo rate in the last 8 MPCs of the RBI. The last change in the repo rate came in February 2023. Then, RBI MPC increased the repo rate by 0.25 percent. Before hitting the freeze button, the repo rate was increased by 2.50 percent from May 2022 to February 2023. After that, the policy rate was changed to 6.5 percent.

These things will need to be taken into consideration in RBI MPC

1. Repurchase rates: That is the benchmark interest rate at which the Reserve Bank of India lends to commercial banks. However, experts have already said that the RBI will not make any changes to the interest rate in the August 8 announcement. According to a Bloomberg report, Kaushik Das, chief India economist at Deutsche Bank AG, said that we expect there to be no change in either the repo rate or the policy stance in the August policy. However, he is of the opinion that the RBI may change its stance.
2. Dear: India’s inflation remains above the target level of 4 per cent. The inflation rate in the month of June was 5 per cent. However, the RBI Governor has already warned that while there may be a decline in the inflation rate in July and August, there may be an increase in the month of September. The Reserve Bank of India has already estimated the inflation rate to be 4.5 per cent in the current financial year.
3. Central banks around the world: Central banks around the world have changed their stance or are planning to change it. The Bank of Japan raised its interest rates for the second time this year and the Bank of England cut its key interest rates. The US Federal Reserve (FED) is also considering a rate cut as fears of the economy slipping into recession have grown among the investment community.
4. Growth rate: On the other hand, it will also be a matter of seeing what kind of stance the RBI takes on growth. In the last meeting, the RBI had increased the estimate of the growth rate in the current financial year to 7.2 per cent. It will now be interesting to see whether the RBI makes any changes in its growth estimates or not.