The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is scheduled to meet on 4-6 December 2024, and experts believe that there will be no change in the repo rate this time too. Central Bank governor Shaktikanta Das will announce the results of the meeting on December 6. The repo rate has been stable at 6.5% since February 2023, and with retail inflation remaining above 6%, a rate cut is unlikely at the moment.

Inflation and economic growth: A dual challenge

Experts believe that due to high inflation and slow economic growth, RBI has limited options to cut interest rates. In October 2024, consumer price-based inflation crossed 6%, which is more than the tolerance limit of the central bank. On the other hand, the GDP growth rate in the second quarter of the current financial year was lower than expected.

Bank of Baroda Chief Economist Madan Sabnavis said, "Given the global and domestic economic uncertainties, the status quo on the repo rate is more likely to remain. Also, changes are expected in the estimates of inflation and GDP growth."

Concerns over falling GDP growth

Due to the weak performance in the second quarter, experts expect the RBI to cut its growth forecast for FY 2024-25. ICRA Chief Economist Aditi Nair said, "The MPC may reduce the growth target in the December meeting. If inflation softens, a rate cut may be possible in February 2025."

When is the possibility of rate reduction?

According to economists, the possibility of relief in repo rates is in February next year, when inflation is expected to be under control. As of now, RBI's priority is to control inflation, while efforts are on to promote growth.

What is RBI's stance indicating?

Analysts believe that RBI will adopt a cautious approach in its decision. This step will not only help in controlling inflation but will also deal with the risks of global financial instability.

There are indications of stability in interest rates and a reduction in GDP growth estimates in the upcoming monetary policy review. In such a situation, RBI needs to take balanced steps to maintain economic stability. There is hope for relief in rates in February 2025, which can be a positive sign for the domestic market.