RBI likely to go for status quo: Experts

Price Pressure:

♦ RBI will announce policy decision on Aug 8

♦ It is likely to retain key rate at 6.5%

♦ Inflation remains high at 5.1% as against RBI target of 4%

Mumbai: Reserve Bank of India (RBI) is likely to keep the key interest unchanged at 6.5 per cent on Thursday and wait for more macroeconomic data before taking a call on rate cut in line with expectations, experts said.The US Federal Reserve has decided to maintain a status quo on its interest rate for now and indicated there could be monetary policy easing in the coming months. Amid persisting inflationary pressures, RBI will be closely tracking the US monetary policy trajectory before changing its stance on interest rate, which has remained unchanged since February 2023, experts opined.

The Monetary Policy Committee (MPC) may also refrain from rate cut as economic growth is picking up, notwithstanding the elevated interest rate of 6.5 per cent (Repo rate). The meeting of the Reserve Bank Governor Shaktikanta Das headed MPC is scheduled for August 6 to 8. Das will announce the decision of the rate-setting panel on August 8 (Thursday). The central bank last hiked the repo rate to 6.5 per cent in February 2023 and since then it has held the rate at same level in its last seven bi-monthly monetary policy reviews.

“We do expect a status-quo position to be adopted by RBI in the forthcoming credit policy. Inflation remains high even today at 5.1 per cent and while this will come down numerically in the coming months, it will be more due to the base effect,” said MadanSabnavis, Chief Economist, Bank of Baroda. He further said growth is on the stable path which means that the present interest rate situation does not militate against business.

“The RBI would rather wait and be sure that inflation is on the downward path on a durable basis before taking any action. While we do not expect any change in GDP forecast, there is a possibility of new guidance on inflation numbers,”Sabnavis said.

Aditi Nayar, Chief Economist, ICRA, said that high growth in FY2024, combined with the inflation of 4.9 per cent in first quarter of the current fiscal are unlikely to shift the voting pattern.