RBI MPC Meeting 2024 LIVE News Updates: RBI MPC Meeting 2024 LIVE News Updates: RBI Governor Shaktikanta Das announced the decisions of MPC’s last bi-monthly meeting of FY24 today. Maintaining a steady course, the Reserve Bank maintained the repo rate at 6.5 percent. The last adjustment occurred in February 2023 when the benchmark rate was raised from 6.25 percent to address inflationary concerns driven largely by global economic dynamics.
RBI projected a GDP growth of 7 per cent for 2024-25 financial year, which is lower than the 7.3 per cent expansion estimated for the current fiscal.
Das said rural demand continues to gather pace, urban consumption remains strong and investment cycle is gaining steam on the back of increased capex.
While there has been a moderation in retail inflation during the current fiscal year, following its peak at 7.44 percent in July 2023, it still remains elevated. As of December 2023, it stood at 5.69 percent, residing within the Reserve Bank's comfort range of 4-6 percent, albeit warranting ongoing vigilance.
The Reserve Bank of India (RBI) is anticipated to maintain its current interest rates following its upcoming monetary policy review, as indicated by participants in a recent survey conducted by ET. However, some suggest that a fiscally conservative interim budget and global monetary easing signals might lead the central bank to soften its stance on tight liquidity conditions, which have resulted in borrowing costs exceeding policy rates.
All twelve respondents unanimously projected that the Monetary Policy Committee (MPC) would leave the repo rate unchanged at 6.50% after its meeting on February 8. They anticipate the panel to uphold the status quo for the sixth consecutive time. The repo rate denotes the rate at which the RBI lends funds to banks.
"We anticipate the committee to maintain a stance towards withdrawing accommodation despite tight liquidity conditions, but there's likely to be a notable shift in communication," remarked Rahul Bajoria, head of emerging markets Asia economics at Barclays.
A neutral monetary policy stance would offer the RBI greater flexibility in managing liquidity, enabling adjustments to financial conditions compared to the current stance, which explicitly focuses on reversing accommodative policies. An accommodative stance allows the central bank to boost economic growth by increasing money supply.
During 2020-21, the RBI injected significant liquidity into the banking system to stimulate demand and keep borrowing costs low amidst the Covid-19 crisis. In April 2022, the MPC began transitioning away from the accommodative stance. Over the past six months, as excess liquidity gradually dissipated, deficit liquidity conditions emerged, with banks' borrowing from the RBI exceeding ?3 lakh crore in January, marking a multi-year high.
"Considering the broader economic context, it might be prudent for the RBI MPC to complement a disinflationary fiscal stance with a dovish pivot," commented economists from ICICI Securities Primary Dealership, who anticipate a shift in stance to neutral.
Tight liquidity conditions have resulted in the weighted average call rate (WACR) and other overnight funding instruments consistently remaining above the repo rate. According to the RBI's monetary policy framework, the WACR should align with the repo rate. Elevated money market rates have translated into higher rates on commercial papers and certificates of deposits, affecting firms and banks seeking funds.
The government has mandated the central bank to ensure the retail inflation based on the Consumer Price Index (CPI) remains at 4 per cent with a margin of 2 per cent on either side.
The MPC is entrusted with the responsibility of deciding the policy repo rate to achieve the inflation target, keeping in mind the objective of growth.
In an off-cycle meeting in May 2022, the MPC raised the policy rate by 40 basis points and it was followed by rate hikes of varying sizes, in each of the five subsequent meetings till February 2023. The repo rate was raised by 250 basis points cumulatively between May 2022 and February 2023.
The MPC consists of three external members and three officials of the RBI.
The external members of the panel are Shashanka Bhide, Ashima Goyal, and Jayanth R Varma. Besides Governor Das, the other RBI officials in MPC are Rajiv Ranjan (Executive Director) and Michael Debabrata Patra (Deputy Governor).
Milan Tomic
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