Are Home Loan EMIs Becoming a Burden? Here's What the RBI Has to Say

The Reserve Bank of India (RBI) is set to commence its three-day monetary policy committee (MPC) meeting on October 7 and will conclude on October 9 (Wednesday).

Notably, the central bank has maintained the repo rate at 6.50% for the last nine consecutive meetings to balance inflation with economic growth. This time, expectations are mixed, with many observers anticipating signs that might indicate a shift in the RBI's approach. This is the first meeting of the six-member RBI MPC after half of the members were replaced last week.

RBI Governor Shaktikanta Das is expected to announce the MPC's decision at 10 AM on October 9, followed by a press conference at noon.

You can watch both live streams on the RBI's official YouTube channel, as well as its Facebook and X (formerly Twitter) accounts.

The panel is anticipated to consider factors such as inflation (food and fuel prices), global economic uncertainties (including crude oil prices and tensions in the Middle East), and India's economic growth prospects. Observers believe that inflationary concerns and global uncertainties may prompt the RBI to reevaluate its current position. Market participants and analysts are closely monitoring this meeting for any forward guidance on future rate actions. While many expect the RBI to maintain its wait-and-watch approach, a surprise rate hike cannot be completely ruled out.

Expectations — Polls & Economists Views

RBI MPC might introduce a 25-basis point (bps) rate cut, but only by December. For the upcoming 7-9 October meeting, the consensus is that the panel will likely keep the benchmark repo rate steady at 6.5% for the tenth consecutive time.

Regarding policy stance, half of the economists polled expect the MPC to maintain its 'withdrawal of accommodation' stance, while the other half foresee a shift to 'neutral' for the first time since the rate hike cycle began.

Madan Sabnavis, Chief Economist at Bank of Baroda, shared, “We do not anticipate any changes in the repo rate or stance. This is largely due to inflation for September and October exceeding 5%, along with rising core inflation and global uncertainties, such as the Iran-Israel conflict. Thus, a status quo remains the most probable outcome. A slight reduction of 10-20 bps in the inflation forecast may be expected, with no changes to the GDP forecast."

Icra’s Chief Economist, Aditi Nayar, suggested that a shift to a neutral stance might be appropriate in October, followed by a rate-cutting cycle of 25 bps in both December 2024 and February 2025. “While geopolitical risks remain, the abundant monsoon offers some cushion for inflation,” she added.

An HSBC report highlighted three key trends: slowing growth, falling inflation, and the shift from rate hikes to cuts in the external environment. The report suggested that the RBI may change its stance to 'neutral' in the upcoming meeting, followed by 25 bps repo rate cuts in December and February, bringing the rate down to 6%.

About The MPC Members

Earlier this month, the government appointed three new external members to the RBI's six-member MPC: Saugata Bhattacharya, Nagesh Kumar, and Professor Ram Singh. They replace Shashanka Bhide, Ashima Goyal, and Jayanth R Varma.