RBI MPC meets amid concerns of inflation, rate cut unlikely say economists
Jun 05, 2024
Mumbai (Maharashtra) [India], June 5 : The Reserve Bank of India (RBI) is unlikely to reduce the benchmark interest rate in its monetary policy review meeting. The meeting, chaired by Reserve Bank Governor Shaktikanta Das, is underway in Mumbai.
The decision of the MPC (Monetary Policy Committee) will be announced on June 7 (Friday). This meeting is taking place soon after a weaker but clear mandate is given by the electorate for the NDA government, led by the BJP.
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 the same level in the previous seven bi-monthly policies. If RBI decides to keep interest rates untouched again on June 7, it would be the eighth time for the central bank to maintain the status quo on the benchmark repo rate.
RBI has to decide on interest rates amidst challenges of inflation, especially food inflation. Experts say RBI is unlikely to cut the rate, considering the current growth momentum which is revised upwards by most rating agencies.
If the interest rate remains untouched again on June 7, it would be the eighth time for the RBI to maintain the status quo on the benchmark repo rate.
"It is widely expected that the MPC will hold the policy rate in the eighth consecutive meeting. The inflation rate, particularly the food inflation continues to be much higher than the target rate of 4 per cent" said M. Govinda Rao, Member, of the Fourteenth Finance Commission and former Director, of the National Institute of Public Finance and Policy.
The food inflation is continuously posing a challenge, in April the consumer food price inflation surged to 8.70 per cent from 8.52 per cent in March, according to data from the Ministry of Statistics & Programme Implementation.
As per the data the food inflation rose by 1.03 per cent in urban areas and 0.59 per cent in rural areas, with combined food inflation in India increasing by 0.74 per cent.
However, experts also point out that the prospect of an above-normal monsoon and favourable agricultural production in the coming months is expected to contribute to a reduction in food inflation. This optimistic outlook could potentially alleviate inflationary pressures and provide relief to consumers grappling with high food prices.
