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The Reserve Bank of India (RBI) held its first monetary policy committee (MPC) meeting of 2024 from February 6-February 8. It is also the first MPC meet post the announcement of the interim Budget by the Modi government ahead of the general elections. The MPC is expected to hold the repo rate or interest rate steady for the sixth consecutive time. Governor Shaktikanta Das will announce the minutes of the meeting today.
The repo rate was raised by 250 basis points (bps) to 6.5 per cent between May 2022 and February 2023. Following this, the six-member committee hit a pause in the April review of the monetary policy. “There has been no dramatic change in global dynamics since the last policy, giving little reason for the RBI to move and tighten amid global calm,” said Madhavi Arora, lead economist at Emkay Global Financial Services. One of the key aspects of the meeting will be how the central bank responds to the liquidity tightness. A Business Standard poll suggested that in order to infuse liquidity, the central bank will continue with its variable repo rate (VRR) auctions. The respondents also added that the central bank can resort to open market purchase of bonds or reduction in the cash reserve ratio.
According to a report by Nomura, a Japanese brokerage firm, the Reserve Bank of India may shift the MPC stance to ‘neutral’ by June this year and it may start delivering rate cuts starting August 2024. “We expect 1 per cent of rate cuts cumulatively starting August, with a change of stance to ‘neutral’ in Q2, with risks skewed towards earlier easing,” its analysts said.
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