RBI MPC Meeting 2024 Live Updates: RBI likely to keep repo rate unchanged at 6.5%, may change stance

The​ Reserve Bank of India (RBI)​ is set to conclude the three-day Monetary Policy Committee (MPC) meeting today, with Governor Shaktikanta Das expected to announce the central bank’s decision on policy rates.

Economists, however, have noted t​hat the RBI will not make any changes in its policy stance before December.​

FTSE Russell has added India to the FTSE Emerging Markets Government Bond Index (EMGBI), with inclusion starting in September 2025. FTSE Russell announced that the Market Accessibility Level for Indiawill be reclassified from 0 to 1. ^“This decision reflects the continued progress in the accessibility of the market for these securities for international investors and the growing importance of the Indian government bond market in mainstream global emerging markets bond portfolios. FTSE Russell thanks the Reserve Bank of India for its continued dialogue and commitment to facilitating international investment in its local market,” FTSE Russell said in a press release.

The Competition Commission of India has cleared JM Financial’s proposed acquisition of a 43 per cent stake in JM Financial Credit Solutions Ltd, an RBI-registered systemically important non-deposit-taking non-banking finance company (NBFC). It is a subsidiary of JM Financial Ltd (JMFL). It is engaged in wholesale lending activities with a primary focus on real estate financing and corporate financing. The CCI also approved the acquisition of 71.79 per cent of the total paid-up share capital of JM Financial Asset Reconstruction Company Ltd by JMFCSL. It is engaged in the business of acquisition of stressed assets from banks/financial institutions and implementing resolution strategies for the acquired assets. Read more

After a strong recovery on Tuesday, domestic markets are expected to open on a flat note on Wednesday. Gifty Nifty at 25,150 indicates a flat opening. All eyes will be on the RBI monetary policy outcome today. Though a status-quo is widely expected, any cut in interest rates will trigger an immediate rally in the stocks, especially in rate-sensitive sectors such as banking, realty and automobiles. 

The newly-appointed external member on the Monetary Policy Committee (MPC) Saugata Bhattacharya may be more inclined to vote for a repo rate cut and a change in monetary policy stance to “neutral” at the upcoming MPC meeting, going by his article published in businessline in August 2024. 

Bhattacharya, who is currently a Senior Fellow with the Centre for Policy Research (CPR), New Delhi, will participate in his maiden MPC meeting, scheduled from October 7 to 9, 2024.

When we talk of inflation that is targeted by the Monetary Policy Committee, the reference is to the Consumer Price Index. This is the global practice where the idea is to gauge retail inflation that affects individual households. 

This is why policy has moved away from WPI, which is closer to a producer price index, to CPI. The present form of the index as a reflection of the state of consumer price inflation has become a subject of debate with two schools at work. One argues that the index needs to be rebuilt with less emphasis on food which will actually smoothen down inflation.

The Government on Tuesday appointed the Director of the Delhi School of Economics, Ram Singh, noted economist Saugata Bhattacharya, and the Director of the Institute for Studies in Industrial Development, Nagesh Kumar, to the Monetary Policy Committee.

“The Members of the Monetary Policy Committee appointed by the Central Government shall hold office for a period of four years, with immediate effect or until further orders, whichever is earlier,” a Finance Ministry statement said. They will replace Ashima Goyal, an economist and Professor at the Indira Gandhi Institute of Development Research (IGIDR), Shashanka Bhide, a Senior Advisor at the National Council of Applied Economic Research (NCAER), and Jayanth R Varma, a Professor of Finance at the Indian Institute of Management, Ahmedabad (IIM-A).

The Monetary Policy Committee (MPC) of the RBI will announce its bi-monthly monetary policy resolution on October 9. The upcoming meeting will have a new set of external committee members. 

We have now seen 10 resolutions since February 8, 2023 with the policy rate unchanged at 6.5 per cent. Simultaneously, the MPC by a majority vote has also gone in for withdrawal of accommodation in the monetary policy stance, prioritising inflation management over growth.

Inflation-growth relationship is non-linear. While low inflation helps growth (greases the wheels of commerce), high inflation harms growth (puts sand on the wheels of commerce). In India, the threshold level of CPI inflation (with maximum growth) was around 6 per cent earlier. Hence, the inflation target was set at 4 per cent with a tolerable band of +/-2 per cent. The threshold inflation in India seems to have reached around 5.5 per cent recently (Journal of Quantitative Economics, March 2024 by the author) although the tolerance band has remained unchanged. This could be attributed to the flexible inflation targeting (FIT) pursued since 2016, which delivered price stability except during the Covid-19 outbreak and its aftermath.

Foreign Banks expect the Reserve Bank of India (RBI) to keep policy rate unchanged at 6.5 per cent even as some see the central bank changing stance at the upcoming Monetary Policy Committee (MPC) meeting on October 7-9. 

The upcoming MPC meeting will be the first for the three new external MPC members. The government has recently appointed Ram Singh, Saugata Bhattacharya and Nagesh Kumar as the new members of the MPC for four-year terms.

The Reserve Bank is unlikely to cut the benchmark interest rate in its forthcoming bi-monthly monetary policy review later in the week as retail inflation is still a cause of concern, and there is a possibility of the West Asia crisis deteriorating further, impacting crude oil and commodity prices, say experts. 

Earlier this month, the Government reconstituted the Reserve Bank’s rate-setting panel - Monetary Policy Committee (MPC). The reconstituted panel, with three newly appointed external members, will commence its maiden meeting on Monday. 

The Reserve Bank of India’s Monetary Policy Committee (MPC) may prefer to keep the policy repo rate unchanged at their forthcoming meeting as the escalating Iran-Israel conflict could pose inflationary risks due to higher crude oil prices even as growth remains steady.

However, there is a possibility of the stance being changed from “withdrawal of accommodation” to “neutral” as a precursor to a likely rate cut in MPC’s December 2024 bi-monthly monetary policy review, say experts.