Number Theory: Why RBI is not likely to cut policy rates on Friday
The Monetary Policy Committee (MPC) of the Reserve Bank of India will begin its three-day bimonthly meeting today.
This is the last MPC meeting before the presentation of the Union budget – likely a Vote on Account this time – on February 1, 2024. The decisions of the MPC meeting will be announced on Friday. While there are a lot of technicalities to framing of monetary policy, the most keenly watched decision of MPC is on interest rates. The committee has increased the rpolicy rate by 250 basis points – one basis point is one hundredth of a percentage point – between May 2022 and February 2023, leading to a significant increase in debt servicing and mortgage costs for firms and households. Most analysts are of the view that MPC is unlikely to change rates in its meeting. Here are four charts which explain their reasoning.
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