RBI MPC meet: Central bank expected to keep repo rate unchanged at 6.5%

As the Reserve Bank of India (RBI) prepares for its three-day Monetary Policy Committee (MPC) meeting starting from December 6, expectations abound that the central bank will maintain the status quo on the repo rate, leaving it unchanged at 6.5%. 

For the fifth consecutive time, the MPC is expected to keep interest rates on hold again, due to an upturn in GDP growth during the July-September quarter and the easing trend of core inflation.

Here is what experts say RBI is expected to announce on December 8:  

Parijat Agrawal, Head – Fixed Income, Union Asset Management Company said, “We are going into the policy with an improved domestic macro environment and benign external factors. Q2 FY24 GDP surprised on the upside, and therefore we expect RBI to revise the projections up for the full year. The US 10-year has corrected meaningfully from the peak in line with the incoming data and the central bank narrative. Concerns around oil prices have reduced and have been close to around $80 for a few weeks now. Although MPC will emphasise on bringing inflation to the 4% target, we expect MPC to remain on pause on rates and stance. Markets will keenly look for guidance on systemic liquidity and Open Market Operations (OMO). We may also hear a bit more about the retail/unsecured credit environment."

Prasenjit Basu, Chief Economist, ICICI Securities said, “With CPI inflation moderating to 4.87% YoY in Oct’23 (and core CPI inflation to 4.5% YoY), we expect the RBI to keep the policy repo rate unchanged at its next MPC meeting. The prospect of further easing in inflationary pressure is likely to result in the MPC moving to a neutral policy stance (from the previous stance of “withdrawal of accommodation”).”

Umesh Revankar, Executive Vice Chairman, Shriram Finance said "The RBI's ‘State of the Economy’ monthly bulletin for November acknowledged the robust festival-driven demand and positive consumer sentiment. It also mentioned the decline of inflation to 4.7% in October. These statements have kindled hope of a return to the declining rates regime. However, recently, the RBI raised risk weights on consumer credit, credit card receivables, and NBFC exposure, by 25 percentage points up to 125% ostensibly to control the liquidity in the system. It clearly indicates that the financial regulator, rightly so, is in no mood to let its guard down on inflation. However, these measures do have impact on MSME on-lending by NBFC’s putting breaks on credit growth temporarily. While the inflation numbers over the last few quarters have been encouraging, we agree with the RBI’s view that our economy is still not out of the woods. Accordingly, we expect the MPC to maintain the repo rate at 6.5% as it aims to stabilise inflation around the 4% medium-term target by controlling the liquidity in the system. We further anticipate no rate cuts till the beginning of the next fiscal year.”

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Madhusudan Sharma, Executive Director, Bharat Housing Network, housing credit platform and infrastructure for affordable housing said, "The Reserve Bank of India (RBI) is likely to keep interest rates unchanged in its upcoming monetary policy review as inflation is in control. The central bank would want to support the GDP growth which is picking up momentum. This favourable stance could bode well for the housing sector as well, where we anticipate continued strong demand for home loans across segments. Additionally, the sector will also get a boost from expected supportive policy measures particularly in rural and semi-urban areas."