Note this date, decision will be taken in RBI's monetary committee meeting

RBI Meeting: The Reserve Bank of India (RBI) may decide to keep the key interest rate, i.e. repo rate, unchanged in the monetary policy review to be held next week. Experts believe that in view of high inflation and weak GDP growth figures in the second quarter, the central bank may avoid any major rate hike this time.

When and why is this meeting important?

The six-member Monetary Policy Committee (MPC) headed by Reserve Bank Governor Shaktikanta Das will meet on 4-6 December 2024. The result of this meeting will be announced on 6 December. This meeting is taking place at a time when the retail inflation rate continues to remain above the RBI's prescribed tolerance limit (4-6%).

What will be the future of repo rate?

The repo rate has been kept stable at 6.5% since February 2023. Experts believe that RBI can keep this rate stable for some more time.

Inflation impact: Retail inflation crossed the 6% mark in October 2024. This is the main reason for the central bank's concern.

GDP situation: GDP growth in the second quarter has been lower than expected. This raises questions about the pace of economic revival.

Bank of Baroda Chief Economist Madan Sabnavis said, "Given global economic uncertainties and inflationary pressures, RBI may maintain the status quo."

Economic experts' opinion

ICRA Chief Economist Aditi Nair said that given the high level of inflation, there will be no change in interest rates in the December meeting. However, she believes that if inflation softens, a rate cut may be possible in February 2025.

RBI's possible decisions and impact

Focus on inflation: RBI's primary objective is to control inflation. Given the high level of retail inflation, any cut in interest rates would be risky right now.

Economic growth: Given the current economic situation, RBI may revise its GDP forecast. The central bank may reconsider policy measures going forward due to weak GDP growth.

Future outlook: Interest rate cuts are likely if inflation declines by February 2025.

Conclusion

The upcoming RBI meeting will set a crucial direction for the Indian economy. Given the current inflation and GDP scenario, keeping the repo rate unchanged may be a prudent strategy for the central bank. However, expectations of a possible rate cut in February 2025 may indicate an improvement in economic activity.