Khushi Maheshwari, Pune
All eyes are on the Reserve Bank of India’s upcoming Monetary Policy Committee (MPC) meeting from October 7, 2024 to October 9, 2024, as the country’s banking regulator is set to potentially modify the lending rate at which banks shall offer loans.
Though the US Federal Reserve Bank has recently lowered benchmark lending rates by a staggering 50 basis points and other central banks including the Bank of England have also slashed lending rates, analysts and experts are of the opinion that India may not witness a rate cut just yet.
Prevailing volatility due to Iran-Israel tensions post Israel’s killing of Iran-backed Hezbollah’s chief Nasrullah, which has led to a surge in Brent prices, may be a factor which may lead to the MPC maintaining the current lending rate.
Other risks to the economy include food inflation, which was a prevailing factor for the RBI’s decision to leave the repo rate unchanged in the August MPC meeting.
In a statement by Madan Sabnavis, Chief Economist of Bank of Baroda, he expressed how there are not any expectations for change in the repo rate or stance by MPC. He reasoned this with the point that inflation for the months of September and October will be 5%, given the present low inflation is due to the base effect. He also pointed out that core inflation is also at a rise, which could further limit possibilities of any cuts by MPC.
Many await the expected changes and decisions that will come out of the bi-monthly monetary policy committee. Led by RBI Governor Shaktikanta Das, the committee saw the addition of three new external members namely Ram Singh, Saugata Bhattacharya and Nagesh Kumar.
Singh is the director of the Delhi School of Economics, whereas Kumar is the director and the chief executive of the Institute for Studies in Industrial Development. Bhattacharya is an independent economist. All three external members are appointed for a period of four years, and will be replacing Ashima Goyal, Jayanth Varma, and Shashanka Bhide.
Other internal members of the committee include RBI Deputy Governor Michael Debabrata Patra and RBI Executive Director Rajiv Ranjan.
The last repo rate cut By RBI was seen in February 2023. At that time, they had hiked the repo rate to 6.5%. While the banking regulator is expected to change its stance from hawkish to neutral, and bring down inflation forecast by 10-20 basis points, the gross domestic product is not likely to be changed, say analysts.