The Reserve Bank of India’s (RBI) upcoming Monetary Policy Committee (MPC) meeting on October 9, 2024, is expected to keep the repo rate unchanged at 6.5%, in line with most economists’ predictions. Despite global trends, particularly the U.S. Federal Reserve’s recent pivot toward rate cuts, the RBI is likely to maintain its cautious stance, driven by domestic concerns such as inflation and growth dynamics.
Inflation in India has remained below 4% for July and August 2024, but the RBI anticipates a rise in inflation to around 4.7% and 4.3% in the coming quarters. This ongoing inflationary pressure, alongside real GDP growth that fell below expectations in Q1 FY25, may delay a rate cut until December 2024.
Economists are divided on the timing of the first rate cut, with some expecting it as early as December 2024, followed by another in February 2025, bringing the repo rate down to 6%. Others suggest that the RBI might shift from its current hawkish stance to a more neutral position before considering rate cuts, influenced by global economic factors and geopolitical risks.
The newly appointed MPC members—Saugata Bhattacharya, Dr. Nagesh Kumar, and Professor Ram Singh—are expected to play a key role in shaping the future direction of monetary policy. However, they are unlikely to diverge from the overall consensus of maintaining stability for now.
In summary, while the RBI may hold the repo rate steady in the near term, signs of policy easing and potential rate cuts are expected in December 2024 and into 2025, especially if inflation and growth conditions align favorably.
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