The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has commenced its deliberations on Tuesday, with expectations that the central bank will maintain the benchmark interest rates at 6.5 percent. This decision is based on the easing retail inflation and the need to support economic growth. The MPC, headed by RBI Governor Shaktikanta Das, consists of six members and will meet for three days before announcing its decision on June 8.
In the previous MPC meeting held in April, the RBI decided to pause its rate hike cycle and maintain the repo rate at 6.5 percent. This followed a cumulative increase of 250 basis points in the repo rate since May 2022, as the central bank aimed to control inflation.
The MPC’s meeting takes place against the backdrop of a decline in consumer price-based (CPI) inflation, reaching an 18-month low of 4.7 percent in April. Governor Das recently indicated that the inflation figure for May would be lower than April. The CPI for May is scheduled to be announced on June 12.
Economists and industry experts expect the MPC to keep the rates unchanged, considering the global economic slowdown and signs of other central banks pausing or reducing their rate hikes due to easing inflation. The robust GDP growth rate of 7.2 percent achieved by the Indian economy in the financial year 2022-23 is seen as a reflection of its resilience, particularly in sectors such as construction, trade, and hospitality. This positive growth is expected to benefit the real estate sector, which has been supported by government measures.
While some voices advocate for a rate cut to stimulate growth, experts believe the RBI will exercise caution and wait before considering such a step. They suggest that maintaining stable interest rates or implementing a small rate cut, if feasible, could have a positive impact on consumer sentiment and support the interest-sensitive real estate sector.
The actual decisions made by the RBI will depend on various factors, including economic data, inflation trends, global economic conditions, and prevailing challenges. The government has set a mandate for the RBI to maintain CPI inflation at 4 percent with a margin of 2 percent on either side.
The MPC comprises individuals with expertise in economics and finance, including representatives from academic institutions and the RBI. Their collective assessment and analysis will guide the RBI’s decision on the monetary policy rates.
