What To Expect From RBI's Monetary Policy Meet?

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) headed by the governor Shaktikanta Das on Thursday will announce whether the central bank is going to continue or pause the rate hikes to tame inflation. 

Since May 2022, the central bank has raised the benchmark interest rate by 250 basis points. Currently, the repo rate is  at 6.5 per cent and at its peak level since February 2019 is at this moment.

If another rate increase is announced tomorrow, the repo rate will reach its highest point since 6.75 per cent in April 2016.

Mandar Pitale, Head- Treasury, SBM Bank India said, “We expect the RBI to hike the repo rate by another 25 bps during the MPC meeting scheduled in the first week of April 2023. The present macroeconomic environment is witnessing a weaker-than-expected global growth trend for an extended period, supply-side shocks to global commodity and domestic food prices and progressive tightening of financial conditions. This may lead to weaker business sentiments in the longer run. Given the current backdrop of high inflation and mixed-signal on growth, RBI will need to walk a tightrope to achieve a balance."

He added that even after the recent bank episodes, the European Central Bank, US Fed, Bank of England and Swiss National Bank have increased the policy rates in their jurisdiction. Domestic CPI inflation has remained elevated above 6 per cent for the last 2 months.

Sharad Chandra Shukla, Director, Mehta Equities said, "Despite efforts, inflation is still out of control. Inflation in India is still being pushed higher by fuel prices despite OPEC's recent announcement to reduce oil production. Also, we continue to expect that the next policy will raise rates by 25 bps due to the unseasonably early rainfall in some parts of the country that have an influence on the crops."

He further said that the RBI is expected to go in for a 25 bps rate hike in the upcoming monetary policy. With the continuous rise in interest rates, it has led to higher EMIs for home loan buyers impacting affordability, especially for the affordable housing segment.