RBI Monetary Policy: RBI governor says monetary policy primarily guided by domestic situation

RBI MPC meet live updates: Owing to predicted heat conditions, agriculture output and food prices can be problematic. Because of this it is unlikely the RBI is going to reduce policy rates any time soon.

RBI MPC meet live updates: The Monetary Policy Committee was constituted under the Reserve Bank of India Act, 1934. It is a six-member committee comprising three members from RBI including RBI governor Shaktikanta Das and three members appointed by the Central government.

RBI MPC meet live updates: SDF rate is a rate at which the RBI accepts uncollateralised deposits, on an overnight basis, from banks. Currently, SDF rate is at 6.25 percent.

RBI MPC 2024 Live Updates: Sensex was down 120 points ahead of RBI policy decision while Nifty was below 22,500. 

RBI MPC 2024 Live Updates: The next MPC meetings will be held on these dates: June 5-7, 2024 August 6-8, 2024 October 7-9, 2024 December 4-6, 2024 February 5-7, 2025.

RBI MPC 2024 Live Updates: The RBI is likely to keep the policy rate unchanged, considering that growth is robust. 

RBI MPC 2024 Live Updates: Kaushik Das, Chief Economist, India & South Asia, Deutsche Bank, said, “Both repo rate and stance (are) likely to remain unchanged under base case scenario; but can’t rule out the possibility of a change of stance to neutral, given past evidence of the central bank surprising with its decision, particularly in April.”

Aditi Nayar, chief economist ICRA, said, “ICRA believes the policy stance is unlikely to be changed before the August 2024 MPC review, until there is visibility on the monsoon turnout as well as the sustenance of growth momentum and the US Fed’s rate decisions."

Finance minister Nirmala Sitharaman expects Q4 (January-March 2024) GDP growth to be 8 per cent or above 8 per cent. 

RBI MPC did this in February.

RBI MPC will make an announcement today.

RBI MPC decides repo rate.

Too much talk about RBI MPC, right? So what is it?

Monetary Policy Committee's objective is to keep the country's retail inflation within four per cent with a margin of two per cent on either side. It meets at least four times a year to hold talks on the direction the central bank in the financial year. The objective is to strike a balance between sustaining growth and maintaining the inflation target.

1. India’s economy grew at 8.4 percent in Q3 of FY24, fastest among major economies. 
2. The growth was fuelled by a strong performance in the manufacturing and construction sectors.

Goldman Sachs said in its report, “We expect the RBI to take comfort from declining core inflation, slightly soften its hawkish forward guidance, but remain cautious given upside risks to food inflation from weather shocks, and repricing of the Fed funds rate easing path.”

Core inflation refers to the non-food, non-oil part of inflation. It is a key measure of price trends used for policy formulation. Currently, core inflation has eased to 3.3 per cent.

For the uninitiated, here are 5 factors that could impact RBI's repo rate decision. Just a 2-minute read please.

Crude oil prices have been impacted by geopolitical tensions amid Israel-Hamas war. As prices are expected to remain elevated, the RBI will need to account for the impact of the same on inflation.

Seems like the central bank has their work cut out for them.

Heatwave warning India for the April-June period, particularly impacting the central and western peninsular regions, may likely impact the agricultural economy, leading to inflationary pressures as commodity prices rise.

So heatwave does play a role. How much? That remains to be seen.

India's retail inflation in February remained mostly unchanged from a month ago. The Consumer Price Index-based inflation stood at 5.09% in February. It was 5.1% in January.

Why does this matter?

Because it is within the RBI’s target band of 2-6% inflation that has been set for it by the government.

Indian stock market closed in green on April 5 as Nifty surged 80 points to close at 22,514. Sensex also gained 350 points to close at 74, 227. In the Nifty 50 list, 31 shares closed in green while 19 closed in red.

How will markets react after the announcement of results, you ask?

That depends on the MPC results.

The Reserve Bank of India may revise its projection of India's GDP after a surprise increase in the third quarter of the current financial year. 

You ask what is the GDP in February? 

India's gross domestic product (GDP) grew 8.4 per cent in the December quarter, data showed.

The RBI's policy decision may be influenced by global economic trends and comes ahead of the US Federal Reserve's expected first cut in June, as per a Reuters poll. Owing to this, the RBI might hold off on any significant rate cuts until at least July, JPMorgan predicted.

It's all related, after all.

Morgan Stanley expects RBI to act in October instead of June. 

Why? India’s better-than-expected growth, it said. 

The short answer is: Yes.

The long answer is: Indian economy is on an upswing and growth forecasts suggest a robust performance ahead which may result in the RBI adopting a cautious stance on rate adjustments.

On India's economy, the World Bank said in its recent report, “In India, which accounts for the bulk of the region’s economy, output growth is expected to reach 7.5% in FY23/24 before returning to 6.6% over the medium term, with activity in services and industry expected to remain robust."

In the last policy announcement which was held on February 8, the MPC left key repo rate unchanged at 6.5% for the sixth consecutive time.

A similar announcement today as well?

There are various monetary policy stances. 

Accommodative stance means the central bank is prepared to expand the money supply to boost economic growth. 

Neutral stance means that the central bank can either cut rate or increase rate.

Hawkish stance means that the central bank’s top priority is to keep the inflation low.

Before the RBI announces its decision on repo rate, here's what it means. Repo rate is the rate at which RBI provides liquidity to banks against collateral of government and other approved securities.