RBI Monetary Policy: Key Announcements and Expert Expectations

Reserve Bank of India (RBI) Governor Shaktikanta Das is set to deliver the Monetary Policy Statement in Mumbai today, following the conclusion of the RBI’s Monetary Policy Committee (MPC) meeting. This meeting, which marks the fourth bi-monthly policy review for the fiscal year 2025, has captured widespread attention as it may reveal changes in the central bank’s policy stance.

The MPC, which comprises six members, including three newly appointed external members, has been in discussions for the last three days. The announcement by Governor Das is expected at 10:00 AM IST. Notably, experts predict that the RBI will maintain the current repo rate at 6.5% for the tenth consecutive meeting, despite widespread rate cuts by other global central banks such as the US Federal Reserve, the Bank of England, and the European Central Bank.

According to financial experts, while a change in the repo rate is unlikely due to current economic conditions, particularly persistent retail inflation and geopolitical uncertainties in the Middle East, a shift in the RBI’s policy stance could occur. Economists suggest that the central bank may pivot from its current “withdrawal of accommodation” stance to a more neutral position, potentially setting the stage for a future rate cut possibly in December.

This meeting is significant as it introduces three new members to the MPC: Saugata Bhattacharya, Dr. Nagesh Kumar, and Professor Ram Singh, all of whom bring substantial academic and economic expertise to the table. Their perspectives might influence future policy changes, although consensus indicates they may initially align with the RBI’s existing stance.

Governor Das has so far resisted calls for a rate reduction, citing high food prices and their impact on inflation, making it difficult to achieve the RBI’s target inflation rate of 4%. Nonetheless, external economic pressures, such as a favorable monsoon season predicting a bumper crop yield, add complexity to the economic outlook.

Economists like Pranjul Bhandari and Aayushi Chaudhary from HSBC Plc have expressed the view that waiting longer to adjust rates might be less beneficial. They foresee a potential rate reduction to 6% by February should economic conditions push the RBI towards easing policies.

Market analysts are also closely observing any indications of policy relaxation that could lead to a rally in bond markets, with yields already showing signs of easing in anticipation of dovish signals from the RBI.