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Status Quo On Repo Likely As High Inflation Weighs

MPC meeting begins from Dec 4; RBI Guv will announce policy decision on Fri; RBI may lower GDP forecast

Status Quo On Repo Likely As High Inflation Weighs

Status Quo On Repo Likely As High Inflation Weighs
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2 Dec 2024 6:00 AM IST

The high-frequency data suggests that festive linked revival in activity may provide a marginally better H2 growth figure, but overall GDP growth for FY25 is going to be around 100 bps lower than RBI’s estimate of 7.2% - Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank

New Delhi: Reserve Bank of India (RBI) is likely to keep the benchmark interest rate unchanged for one more time in its bilateral monetary policy review later in the week as inflation has breached its upper tolerance limit and may also moderate the growth forecast given the disappointing second quarter GDP numbers, experts say.

Reserve Bank Governor-headed six-member Monetary Policy Committee (MPC) is scheduled to meet on December 4 to 6, 2024. The decision of the rate-setting panel will be announced on December 6 by Governor Shaktikanta Das. It was widely anticipated that the RBI would start reducing the benchmark interest rates soon, but the central bank will have little option this time around as the latest print of retail inflation is above 6 per cent as it surged to 6.2 per cent in October.

The Reserve Bank has kept the Repo or short-term lending rate unchanged at 6.5 per cent since February 2023 and experts think some easing could only be possible in February. Madan Sabnavis, Chief Economist, Bank of Baroda said given the rather uncertain global environment and the possible impact on inflation and the fact that currently inflation has been averaging close to 5.9 per cent in the last two months, a status quo on repo rate will be the logical outcome from the policy.

“There would be a change in RBI projections for both inflation and GDP as inflation has been higher so far than the RBI forecast for Q3 and GDP growth has come much below expectations in Q2. It would be of interest to see what the projections this time are,” Sabnavis said. India’s economic growth slowed to near two-year low of 5.4 per cent in the September quarter of this fiscal due to poor performance of manufacturing and mining sectors, but the country continued to remain the fastest-growing large economy, as per government data released on Friday.

RBI interest rate inflation forecast GDP growth monetary policy economic outlook 
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