MPC Poll: RBI Expected to Maintain Status Quo in October, Potential Shift to Neutral Stance in December 

The upcoming Monetary Policy Committee (MPC) meeting of the Reserve Bank of India (RBI), scheduled from October 7 to 9, is expected to maintain the status quo on interest rates

According to a poll involving 12 economists, bankers, and fund managers, the central bank will likely keep the repo rate unchanged at 6.5 per cent due to ongoing growth-inflation risks. India’s economic growth, though strong, is accompanied by inflationary pressures, particularly from food prices, which remain a concern for the central bank. While there is broad consensus on maintaining the current repo rate, experts are divided on whether the RBI will change its policy from “withdrawal of accommodation” to “neutral.” A neutral stance would allow flexibility for future rate hikes or cuts, balancing inflation control with supporting growth. Gaura Sen Gupta, an economist at IDFC First Bank, stated that India’s robust domestic growth gives the RBI room to wait for further clarity on inflation risks. The expected shift in stance, potentially followed by a rate cut, is fueled by the recent 50 basis points (bps) rate cut by the US Federal Reserve in September. This move has led to speculation that the RBI might follow suit in December.

Furthermore, India’s consumer price index (CPI) inflation has remained below the 4 per cent target for the past two months, which could give the RBI more confidence to adjust its policy. Despite recent declines in inflation, the RBI is not expected to change its inflation projections for the upcoming fiscal year. In the August MPC meeting, CPI inflation for 2024-25 was forecast at 4.5 per cent. Experts believe these projections will be maintained, with the central bank keeping a cautious eye on rising food prices. India’s GDP growth is expected to remain steady at 7.5 per cent for FY25, according to Madhavankutty G., Group Chief Economist at Manappuram Finance. It comes after India’s economic growth slowed to 6.7 per cent in the first quarter of FY25 due to election-related factors. The MPC will likely maintain its GDP growth projections in the upcoming meeting.