The Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) meeting for the new fiscal year 2023-24 will begin today, on April 3, 2023. The meeting that will conclude on April 6, 2023 with RBI Governor Shaktikanta Das’ address, will see the MPC’s decision on key interest rate. As the central bank continues its fight with inflation, analysts expect a moderate hike of 25 basis points (bps) in the interest rate.
As per analysts, the RBI is expected to continue its stance of monetary tightening in order to stay in line with its global peers. Since the US Federal Reserve and the European Central Bank (ECB) have hiked their key interest rates, the move is also expected to be a key driver of this RBI MPC.
If one were to look at the data, the central bank has hiked the repo rate by 250 bps since May 2022. While these hikes varied from 50 bps to 25 bps, the upcoming MPC decision, as per analysts, may be the last hike in the key interest rate, if RBI favours the same.
In addition to this, even the increase in retail inflation figures, are expected to be key drivers of this MPC meeting. It must be noted that inflation has been pressing issue for RBI for quite some months and despite the central bank’s moves, it has stayed outside the tolerance limit.
According to Madan Sabnavis, Chief Economist, Bank of Baroda, “Given that CPI inflation has been 6.5 per cent and 6.4 per cent in the last two months and that liquidity is now near neutral, we may expect the RBI to raise rates once again by 25 bps and probably change stance to neutral to signal that this cycle is over.”
It must be noted that the RBI MPC meeting’s final decision on the interest rate(s) will only be known on April 6, 2023. However, despite a global economic downturn, many experts believe that India would fair well.