Repo rate not on cards, hawkish stance to be maintained: Economists

After posting robust GDP growth in the second quarter of FY23, now all eyes are looking up to the RBI’s monetary policy meeting decision which will come out on December 8. Economists and experts are of the view that RBI will keep the repo rate unchanged at 6.50 per cent.  Even SBI in its report has said that it expects the RBI to continue the pause stance in upcoming policy. "Domestically, we believe at 6.50 per cent, we are in for a prolonged pause, no rate reversal cycle till June ’24 stance,” SBI said in the report.

Economists are saying that the apex bank will keep the repo rate unchanged consecutively for the fifth time.  The retail inflation in India is still above the RBI tolerance band and is expected to go beyond 6 per cent in November. The inflation may go out of hand if rate cuts take place, thus RBI will keep the repo rate unchanged this time.

“There is a strong likelihood that RBI-MPC will keep the benchmark repo rate unaltered at 6.50 per cent in the upcoming meeting and thereby continue with the pause mode for the fifth consecutive policy review. It’s also unlikely that there will be any revision in the monetary policy stance of withdrawal of accommodation," said Suman Chowdhury, Chief Economist and Head – Research, Acuité Ratings & Research.

As far as the stance of RBI is concerned the hawkish tone is likely to be maintained since the upside risks to inflation remain tentative. And many economists believe that another pause, or two, might eventually pave the way to the first rate cut of around 50 bps in mid-2024. “The 7.6 per cent GDP growth has surpassed the RBI's expectations in Q2 FY24, complemented by consumer inflation comfortably within the RBI's zone of comfort. With these favourable economic indicators, the likelihood of a rate hike in the upcoming MPC is minimal. Despite potential challenges such as a possible uptick in food inflation and a volatile external environment, the RBI is poised to maintain its hawkish stance, keeping the repo rate steady at 6.5 per cent for the fifth consecutive time this year,” Shishir Baijal, Chairman and Managing Director, Knight Frank India said