Published 14:09 IST, October 7th 2024
RBI begins three-day monetary policy meeting, is rate cut likely?
The monetary policy committee, headed by RBI Governor Shaktikanta Das, is likely to take into consideration quite a few things in arriving at a decision.
RBI MPC: The Reserve Bank of India ( RBI ) began its three-day monetary policy meeting on October 7. Attention here is on whether the RBI will keep the repo rate at 6.50 per cent or will go for the rate cut, the way the US Fed cut the rates by 50 bps in September. It would be the ninth consecutive meeting wherein the repo rate has been consistent. The reason is that the RBI is focusing at the same time on keeping inflation in check and the economy.
It takes place as a reaction to the latest move of the US Federal Reserve to cut interest rates by 50 basis points in an extended stability backdrop.
Key Factors Influencing RBI 's Decision
The monetary policy committee, headed by RBI Governor Shaktikanta Das, is likely to take into consideration quite a few things in arriving at a decision. Some of these include inflationary trends, global economic uncertainties, and prospects related to domestic growth. Inflation continues to pose a challenge, more particularly concerning food and fuel prices that have risen earlier this year
The all-India consumer price inflation, as per the Ministry of Statistics & Programme Implementation, was at 3.65 per cent in August and therefore within the RBI 's target band; however, food inflation went up to 5.65 per cent, which is above the RBI 's medium-term target of 4 percent.
RBI MPC: The Reserve Bank of India ( RBI ) began its three-day monetary policy meeting on October 7. Attention here is on whether the RBI will keep the repo rate at 6.50 per cent or will go for the rate cut the way the US Fed cut the rates by 50 bps in September. It would be the ninth consecutive meeting wherein the repo rate has been consistent. The reason is that the RBI is focusing at the same time on keeping inflation in check and the economy.
It takes place as a reaction to the latest move of the US Federal Reserve to cut interest rates by 50 basis points in an extended stability backdrop.
Key Factors Influencing RBI 's Decision
The monetary policy committee, headed by RBI Governor Shaktikanta Das, is likely to take into consideration quite a few things in arriving at a decision. Some of these include inflationary trends, global economic uncertainties, and prospects related to domestic growth. Inflation continues to pose a challenge, more particularly concerning food and fuel prices that have risen earlier this year
The all-India consumer price inflation, as per the Ministry of Statistics & Programme Implementation, was at 3.65 per cent in August and therefore within the RBI 's target band; however, food inflation went up to 5.65 per cent, which is above the RBI 's medium-term target of 4 percent.
Geopolitical Tensions and Economic Resilience
External triggers, like the increasing global crude oil price, which is complemented by the rising tensions in West Asia, might also drive RBI 's decisions. "The RBI is likely to maintain the status quo in the next MPC meeting. The basic effect of inflation needs to weather for clearer insights. Geopolitical concerns in the Middle East add to inflationary pressures from higher crude prices." said Shishir Baijal, Chairman and Managing Director of Knight Frank India.
Even though interest rates may be at a different level, the Indian economy has still been resilient, particularly consumption indicators, even in the otherwise battered real estate sector. Baijal said that this sustained growth provides enough cushioning for the RBI to keep the repo rate at the existing level of 6.5 per cent. The credit and deposit growth are already on unequal footing with the former outpacing the latter, which might force the RBI to keep policy rates tight for a rather longer period.
Industry Views On Future Rate Cuts
Amit Jain, Managing Director, Arkade Developers felt on the contrary saying rate cut is imminent in near time. "Repo rate stability since February 2023 has helped real estate benefit from constant borrowing and lending rates, including home loans.". However, with the modest headroom and the rising inflationary pressures, we expect a 25 to 30 basis points rate cut in October. This easing will further spur borrowings and home sales, especially in the festival season which is crucial for the market.
According to Jain, festival season is critical for sales to take place. He says "Rate cuts will boost demand in all markets, especially in Mumbai which saw one lakh home sales in a record nine months". As the RBI 's monetary policy meeting unravels, the decisions taken there will shape the economic and political landscape of India in the coming months.
"Given the severely constrained headroom and mounting inflationary pressures, we are looking forward to a 25 bps to 30 bps rate cut in October. The rate cut will increase borrowing, and boost home sales further, especially during Q3FY 24–25 festive seasons. Since the festive season is around the corner, it's one of the most important times for home sales. Rate reductions will boost demand in all markets, but particularly in Mumbai, which recently crossed the one lakh home sales milestone in record 9-month time," Amit Jain, MD, Arkade Developers said.
External triggers, like the increasing global crude oil price, which is complemented by the rising tensions in West Asia, might also drive RBI 's decisions. "The RBI is likely to maintain the status quo in the next MPC meeting. The basic effect of inflation needs to weather for clearer insights. Geopolitical concerns in the Middle East add to inflationary pressures from higher crude prices." said Shishir Baijal, Chairman and Managing Director of Knight Frank India.
Even though interest rates may be at a different level, the Indian economy has still been resilient, particularly consumption indicators, even in the otherwise battered real estate sector. Baijal said that this sustained growth provides enough cushioning for the RBI to keep the repo rate at the existing level of 6.5 per cent. The credit and deposit growth are already on unequal footing with the former outpacing the latter, which might force the RBI to keep policy rates tight for a rather longer period.
Industry Views On Future Rate Cuts
Amit Jain, Managing Director, Arkade Developers felt on the contrary saying rate cut is imminent in near time. "Repo rate stability since February 2023 has helped real estate benefit from constant borrowing and lending rates, including home loans.". However, with the modest headroom and the rising inflationary pressures, we expect a 25 to 30 basis points rate cut in October. This easing will further spur borrowings and home sales, especially in the festival season which is crucial for the market.
According to Jain, festival season is critical for sales to take place. He says "Rate cuts will boost demand in all markets, especially in Mumbai which saw one lakh home sales in a record nine months". As the RBI 's monetary policy meeting unravels, the decisions taken there will shape the economic and political landscape of India in the coming months.
"Given the severely constrained headroom and mounting inflationary pressures, we are looking forward to a 25 bps to 30 bps rate cut in October. The rate cut will increase borrowing, and boost home sales further, especially during Q3FY 24–25 festive seasons. Since the festive season is around the corner, it's one of the most important times for home sales. Rate reductions will boost demand in all markets, but particularly in Mumbai, which recently crossed the one lakh home sales milestone in record 9-month time," Amit Jain, MD, Arkade Developers said.
Updated 14:11 IST, October 7th 2024