The Monetary Policy Committee (MPC), which is led by RBI Governor Shaktikanta Das, began its three-day meeting on Wednesday with expectations of a rate status quo in its bi-monthly monetary policy review.
Interest rates for both corporate and retail borrowers would be steady in the event of a status quo. In light of the high inflation and external variables, experts predict that the Reserve Bank will keep the benchmark rate at 6.5 percent.
Following the Russia-Ukraine war, the Reserve Bank began gradually raising the policy rate in May 2022, and in February of this year, it was raised to 6.5 percent. The rate has remained steady ever since in the last three bimonthly reviews of monetary policy.
The credit policy will probably maintain the current rate structure and policy posture this time. As a result, the repo rate will remain at 6.5 percent until the accommodation is removed. However, a rate increase can be ruled out because of the declining inflation track. The MPC may delay reducing the repo rate for a more extended period of time, nevertheless.
As inflation is still high, it seems unlikely that the policy rate will be lowered; but, for the sake of MSMEs and the economy, we anticipate the RBI to keep things where they are since any more increases will start to impede economic growth. Given the release of liquidity from the incremental CRR imposed by earlier policy, the considerable tightening in liquidity that was observed in the second half of September is unlikely to persist.
Even though there has been a protracted delay (on the repo rate), it is urgent that we turn our focus to the real estate industry, particularly during the current holiday season. At this point, the RBI’s decisions could make or break our ability to meet our housing goals.
The recent surge in global bond yields and crude oil prices will put the MPC on the lookout for inflation-growth dynamics. At its upcoming October meeting, the MPC is anticipated to keep
rates and its current stance. The MPC is tasked for choosing the policy repo rate with the goal of hitting the inflation target while taking growth into consideration.