RBI Meeting Today: Rates Likely Unchanged Despite High CPI Inflation

With the growing domestic rates of momentum, the consumer price for index-based inflation remains at 4% above the target of the central bank. This situation will prompt RBI to put a stay on the rates. A shift to a ‘neutral’ stance is possible with strong GDP growth and the possibility of rate cuts.

Result of RBI meeting:

The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) was seen leaving the repo rate unchanged at 6.5% After the end of a three-day meeting starting from Wednesday. The panel was expected to keep the interest rates unchanged as the Consumer Price Index (CPI) inflation has been above RBI’s comfort zone consistently. This decision was made focusing on providing support to economic growth and checking inflation is contained.

Many economists believe that the central bank would stay to its policy stance decision of focusing on the withdrawal of accommodation. Although there are still a few who hope that the Central Bank would lighten a bit of policy stance.

Goldman Sachs has expected that the Reserve Bank of India will take comfort from the reduction of core inflation. This will soften the hawkish forward guidance along with being cautious about the upside risk of food influence from weather shocks.

According to India's Finance Minister Nirmala Sitharaman, the first three quarters of financial year 24 have grown India's GDP by 8% and it is predicted that this growth will follow a steep path even in the March quarter.

Upcoming Targets of RBI and Central Bank:

According to the economists, the Reserve Bank of India is targeting a projection of growth for the financial year 2025.

With this target, the central bank is projecting a GDP growth of 7% in the financial year 2025. The Consumer Price Inflation (CPI) increased to 5.09% in February from 5.10% in January.

Goldman Sachs expects this growth to be 5.2% in March with the rise in the price of vegetables and pulses.

Predicting the rate cuts:

Regarding rate cuts, the economist believes that information still needs to lower the value to RBI's desired 4% level. The Chief Investment Strategist, V K Vijayakumar stated that a rate cut is not warranted this time but they can be expected this year. As the growth momentum still stands strong this financial year can be expected to have a growth of 7.6% excelling all initial estimates. With certain policies and reforms, India has a possibility of achieving 7% robust growth in FY25.

To Summarize

In conclusion, in a recent meeting of the Reserve Bank of India, the MPC decided to keep the repo rate unchanged at 6.5% after a three-day meeting. This aligns with the expectations and decisions to keep interest rates steady due to the persistence of CPI inflation above the comfort zone of RBI.