The Reserve Bank’s Monetary Policy Committee will begin its three-day meeting tomorrow to decide the key rates and announcements for the bi-monthly monetary policy review that will be announced by RBI Governor Sanjay Malhotra on Friday.
It may be recalled that RBI had started the rate easing cycle in February this year and had reduced the repo rate by 100 basis points in three tranches to 5.5 per cent, before hitting the pause button in August.
Going forward, some experts believe that the RBI may continue with the pause on interest rates as economic growth has picked up, sustained by fiscal consolidation, targeted public investment, and various reforms, such as the GST rate cut. However, a few others believe that the MPC may cut the benchmark lending rate by 25 bps as inflationary pressures are subdued.
A research report from the State Bank of India’s economic research department has said that monetary policy has entered a phase of pause with differences across geographies. It, however, suggested that it is important to continue with decisions beyond direct rate actions, but towards affirmative actions outside policy space. On the other hand, Crisil’s Chief Economist, Dharmakirti Joshi expects a 25 basis point cut considering the significant decline in retail inflation.