Table of Contents
- Potential Policy Changes
- Growth Forecast
- Fiscal Deficit and RBI Dividend
- Inflation Concerns
- Impact of US Federal Reserve Actions
- Key Data Points of RBI MPC meeting
- RBI’s Upcoming Decisions
- Expert Opinions
RBI MPC meeting 2024 : The Monetary Policy Committee (MPC) of The Reserve Bank of India (RBI) would on the 7th of June make an announcement for its monetary policy. On the onset towards third term governance at the helm of a new regime by Narendra Modi, country is now concentrating on interest rates and economic predictions announced by RBI. Experts at the Citizens’ Monetary Policy hosted a meeting on CNBC-TV18 that was discussing possible results. The major points from the meeting are:
Potential Policy Changes
Committee chairman Pranab Sen highlighted the uncertainty brought by the election results. The question remains whether the interest rates will remain stable. Sen mentioned that this decision would be made in the coming days, and the RBI must consider the high level of uncertainty.
Growth Forecast
Nomura’s Sonal Varma sees no need to change the current growth forecast. Despite uncertainties in government expenditure composition, the focus remains on supply-side reforms related to capital expenditure. Varma believes that the economy’s fundamentals remain unchanged.
Fiscal Deficit and RBI Dividend
SBI’s Soumya Kanti Ghosh stated that the government could operate with a deficit slightly below 5%, possibly between 4.9% and 5%. Citi’s Samiran Chakraborty mentioned that the market is not currently valuing any additional borrowing for FY2025. He emphasized that the fiscal deficit for FY24 is now expected to be 5.6%, down from 5.8%, allowing for further deficit reduction.
Inflation Concerns
According to Ghosh, inflation is projected to remain below 5% for the entire FY2025. The RBI has forecasted an average inflation rate of 4.5%, considering the current pace and development. Ghosh noted that while inflation might not hit the 4% mark soon, it is expected to hover around 4.5% for most of the year.
Impact of US Federal Reserve Actions
JP Morgan’s Sajjid Chinoy remarked on the initial expectations of six rate cuts at the year’s start, which have now dwindled to less than two. Given the economic resilience, any further reduction in core inflation will significantly depend on global financial conditions, primarily influenced by the US Federal Reserve.
Key Data Points of RBI MPC meeting
| Topic | Expert | Key Insights |
|---|---|---|
| Policy Changes | Pranab Sen | High uncertainty due to election results; interest rate stability to be decided soon. |
| Growth Forecast | Sonal Varma | No changes needed; focus on capital expenditure and supply-side reforms. |
| Fiscal Deficit | Soumya Kanti Ghosh | Deficit likely between 4.9% and 5%; possibility of further reduction. |
| Inflation | Soumya Kanti Ghosh | Projected below 5% for FY2025; average forecast at 4.5%. |
| US Federal Reserve Actions | Sajjid Chinoy | Market expectations reduced from six to less than two rate cuts; global financial conditions are crucial. |
RBI’s Upcoming Decisions
The MPC decisions will be made public by RBI Governor Shaktikanta Das very soon which will determine a cutback on loan interest rates. Since February 2023, the central bank has not reviewed the repo rate after moving it to 6.5%.This is the rate at which the RBI lends to commercial banks.
A potential decrease in the third quarter of the CFY, is raised by an SBI research paper, though the repo rate is anticipated to be stable in contrast to hopes. Therefore, this second meeting of MPC for FY25 is critical and it is anticipated that RBI would have to take a hard-core monetarist stand amid booming economy rather than clear inflation prospects. The recent survey results show 71 over 72 economists predicting that there will be no adjustment in the rate for June 5-7 meetin
Expert Opinions
Experts believe that despite the BJP not securing a majority, the NDA is forming the government for the third time, increasing uncertainty. The RBI will need to consider this while making decisions. Amid economic acceleration, it is anticipated that the MPC will avoid rate cuts. The MPC consists of three external members and three RBI officials, including Shashank Bhide, Ashima Goyal, and Jayant R. Varma, who will play significant roles in determining the rates.
Stay tuned for the RBI Governor’s announcement to see if there will be any relief from expensive loans.
