June 7, 2023: Analysts and experts expect the Reserve Bank of India (RBI) to maintain a status quo on its benchmark lending rate during its policy announcement on June 8, 2023. They are of the view that the banking regulator would factor in the easing of retail inflation in April (consumer price-based inflation declined to an 18-month low of 4.7% in April), and the potential for further decline while it watches how past hikes in the repo rate play out.
The six-member rate-setting Monetary Policy Committee (MPC) of the apex bank, chaired by RBI governor Shaktikanta Das, started its three-day policy meeting on June 6.
The other members of the MPC are Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Rajiv Ranjan and Michael Debabrata Patra. The decision of the 43rd meeting of the MPC will be announced on June 8.
What does the market expect from the RBI?
According to a SBI Research’ report, titled Prelude to MPC Meeting: June 6-8, 2023, the RBI may opt for prolonged pause at 6.50% repo rate.
A Reuters poll of economists taken between May 16 and 29 indicated that the RBI would leave its key interest rate unchanged at 6.50% on June 8 and for the remainder of 2023 as it waits to see the economic impact of a series of hikes over the past year.
“Inflation has come in lower than 5% in April and will be even lower in May. This being the case, the view would be that past repo rate actions have had an effect on inflation and hence there can be another pause taken,” Bank of Baroda chief economist Madan Sabnavis told media.
“We do not expect any rise in the repo rate because it has already been raised by 2.5%, and inflation is moderate,” Bank of India managing director Rajneesh Karnatak told news agency PTI.
In its April policy meet, the RBI hit a pause button on the rate hike cycle, leaving the repo rate unchanged at 6.50%. The apex bank has raised the repo rate by 250 basis points since May 2022. The repo rate, at which the RBI lends funds to scheduled banks in India, currently stands at 6.50%.
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