The Reserve Bank of India (RBI) monetary policy committee will decide its monetary policy action on Thursday, after a three-day review meeting. SBI Research expects the central bank to put a pause on the key policy rates. The outcome of the review meeting will be announced on Thursday, August 9, morning.
RBI generally conducts six bi-monthly meetings in a financial year, in which it decides interest rates, money supply, inflation outlook, and various macroeconomic indicators. The ongoing three-day meeting started on Tuesday.
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In its previous meeting in June, the central bank’s monetary policy committee unanimously decided to keep the repo rate unchanged at 6.5%, which was expected by most of the analysts. RBI in its April meeting too had paused the hike in repo rate. The repo rate is the rate of interest at which RBI lends to other banks.
"We expect the RBI to pause in August’s policy. Domestically, we believe at 6.50 per cent, we are in for a prolonged pause as seasonality of inflation should taper," the SBI Research report, authored by SBI's Group Chief Economic Adviser Soumya Kanti Ghosh, said, as cited by The Economic Times.
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The major key driving factors behind this could be 18-month low inflation and its and its potential for further decline. Inflation has been a major concern for many countries, including big economies, however, India has managed to steer its inflation trajectory quite well.
Barring the April pause, the RBI raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.