As the Reserve Bank of India (RBI) gears up to announce the decision of its Monetary Policy Committee (MPC) meeting on October 9, industry experts on Tuesday said the Central Bank is likely to maintain a status quo on policy interest rates and if food inflation further moderates, a shallow rate cut of 50 bps in the upcoming policy meetings is likely this fiscal.
Dhiraj Relli, MD and CEO, HDFC Securities said while they do not expect the RBI to start its rate cut cycle, the possibility of a change in stance to neutral is on the table.
“The MPC may keep the repo rates steady at 6.50 per cent for the 10th consecutive time. Although it remains a close call, the RBI could very well deliver a no change policy while only changing its tone towards the dovish side,” said Relli.
Despite inflation remaining below 4 per cent over the past two months, primarily due to a favourable base and some sequential slowdown in food prices, the risk to food inflation remains high.
“We anticipate that the MPC will maintain the current policy rate and stance. The commentaries from the newly inducted external members will be closely monitored to gauge future policy directions. Overall, we expect the governor to have a dovish tone, laying the groundwork for a shallow rate cut in the coming months,” said CareEdge Rating in its report on Tuesday.