RBI's rate-setting panel starts discussion on monetary policy; decision on Friday

Mumbai: The Reserve Bank's rate-setting panel on Wednesday started its three-day deliberations on the next set of monetary policy amid expectations that the central bank would once again keep the key interest rate unchanged and focus more on inflation control as concerns over economic growth is abating.

The decision taken at the meeting of the Reserve Bank Governor Shaktikanta Das-headed Monetary Policy Committee (MPC) will be announced on Friday (April 5).

It is the first bi-monthly monetary policy of 2024-25. A total of six MPC meetings are scheduled for the fiscal year beginning April 1, 2024.

The Reserve Bank of India (RBI) last hiked the repo rate to 6.5 per cent in February 2023 and since then it has held the rate at the same level in its last six bi-monthly policies.

Experts said the Monetary Policy Committee (MPC) may take cues from the central banks of some major economies, such as the US and the UK, which are apparently in wait-and-watch mode on interest rate cuts.

Switzerland has become the first major economy to cut interest rates, while Japan, the world's third-largest economy, ended its eight-year period of negative interest rates regime.

"We believe the (monetary policy) stance should continue to be withdrawal of accommodation," said research report of the country's largest lender State Bank of India (SBI).

It further said there is strong evidence of central banks in emerging economies rate actions are predicated by such actions by central banks in advanced economies.

"India is an exception... First RBI (rate) cut in Q3FY25," it added.

On expectations from the RBI, Group CEO of Housing.com Dhruv Agarwala said the central bank is likely to maintain a status quo on key policy rate in its April 5 policy amid strong economic growth.

"Even though the year-long downward trend in core inflation is encouraging, inflation is still close to the upper band of the apex bank's 2-6 per cent target, leaving little room for any rate cut during this policy cycle," he said, adding considering interest rates are likely to remain stable, the demand for housing in the country would continue to get a boost.

On the other hand, Vivek Singhal, CEO, Smartworld Developers an interest rate cut in the upcoming RBI meeting will augur well for India's real estate market.

A rate cut will lower borrowing costs, stimulate demand, and foster investor confidence.

"Such a move has the potential to unleash a wave of growth and revitalisation in the sector. As consumers prioritise stability and security in their investment decisions, a lower interest rate environment would greatly enhance homebuyer sentiment and bolster affordability -- a critical determinant within the housing market landscape," he said.

India posted an 8.4 per cent economic growth in the December quarter of the previous fiscal year. The National Statistical Office (NSO) has revised GDP estimates for the first and second quarters of this fiscal to 8.2 and 8.1 per cent from 7.8 per cent and 7.6 per cent, respectively.

Other members of Governor Das headed MPC are Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Rajiv Ranjan, and Michael Debabrata Patra.

The government has mandated the RBI to ensure retail inflation based on Consumer Price Index (CPI) remains at 4 per cent with a margin of 2 per cent on the either side.

The retail inflation was 5.1 per cent in February.