Will RBI cut Interest Rates on Dec 6? Key Things You Should Know
RBI’s Monetary Policy Committee (MPC) is set to meet on December 6 that can set the tone for India’s economic trajectory. With poor GDP figures, buoyed by soaring inflation and poor urban consumption, experts are rooting for a potential rate cut.
Will RBI cut Interest Rates on Dec 6? Key Things You Should Know
Here are the key things to know ahead of the upcoming MPC Meeting
GDP Growth: A Worrying Factor
India’s GDP slipped to 5.4% in Q2, mainly driven by poor consumption, weaker manufacturing and mining contraction. On the other hand, rural demand remained steady on the back of strong kharif harvest and upbeat rabi crop outlook.
Inflation
Inflation has remained a stumbling block for the central bank as it now crossed RBI’s tolerance level at 6.21%. Moreover, bond yields and Overnight Indexed Swap (OIS) rates have declined considerably, thereby signalling a potential rate cut. As per experts, central bank is unlikely to loosen its bolts and may keep the repo rate unchanged. They claim that the central authority may opt for a rate cut in February 2025 on expectations of lower inflation prints in the coming months.
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Though a reduction in interest rates is unlikely to happen, experts anticipate a potential reduction in CRR. The move will stem financial stability by improving liquidity in the banking sector. Stocks including Chola and L&T Finance are likely to benefit from this decision.
