RBI Monetary Policy meeting tomorrow: Will interest rates be cut?
What's the story
The Reserve Bank of India (RBI) is set to announce its much-anticipated bi-monthly monetary policy decision tomorrow.
This announcement comes amidst heightened global economic uncertainty and a period of rising inflation within India.
Financial markets and businesses across the country are eagerly awaiting the RBI's decision, which will have a significant impact on interest rates, economic growth, and borrowing costs.
Anticipated change
Economists predict shift in RBI's stance
A Bloomberg survey of 35 economists suggests the RBI may shift from its current hawkish stance to a 'neutral' one, the first time since June 2019.
The report states, "There is agreement that the RBI needs to pivot from its hawkish hold to policy easing."
This consensus means an initial rate cut could happen as early as December.
The current repo rate in India is 6.5% and it is expected to remain unchanged for now.
Committee expansion
New members join RBI's monetary policy committee
Notably, the monetary policy committee has recently welcomed three external members.
Among the new appointees is Saugata Bhattacharya, a former chief economist at Axis Bank Ltd., who has publicly advocated for rate cuts by the RBI.
The other two new members are Dr. Nagesh Kumar, director and chief executive at the Institute for Studies in Industrial Development, and Ram Singh, director of Delhi School of Economics.
Rate resistance
Das dismisses calls for rate cuts amid inflation concerns
Despite increasing pressure for a rate cut after the US Federal Reserve and other central banks have taken similar steps, RBI Governor Shaktikanta Das has so far resisted the calls.
He maintains that high food prices will keep inflation from consistently hovering at the 4% target level.
However, good rainfall and predictions of a bumper harvest are only increasing this pressure on the RBI.
Rate forecast
Economists forecast potential rate cut in December
HSBC economists believe a tweak in the RBI's policy language could pave the way for a quarter-point rate cut in December.
They expect another quarter-point cut at the February meeting, taking the repo rate to 6%.
Traders are keeping a close watch on these developments as they could signal more favorable liquidity conditions within the banking sector.