The Reserve Bank of India (RBI) is likely to maintain the status quo in its monetary policy rates and stance for the fourth time in a row, amid ballooned retail inflation and hawkish US Federal Reserve, according to experts and analysts. 

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Most of the economists expect the central bank to keep the repo rate unchanged at 6.5% and the policy stance at the withdrawal of accommodation. 

While core inflation has been steadily decreasing, retail inflation remains above the RBI's target range. The central bank is likely to closely monitor the situation, particularly keeping an eye on erratic monsoon patterns and the increasing prices of crude oil.

“We expect the MPC (monetary policy committee) to remain on hold in the October policy while continuing to demonstrate caution amid a cloudy outlook for food inflation and elevated crude oil prices. In Icra’s view, inflation would need to persist above 6% for at least two quarters, amid transmission of pressures to core inflation, to set the stage for a rate hike," Aditi Nayar, chief economist at Icra, was quoted as saying by Livemint.

Since the previous policy update in August, the inflation scenario has displayed a combination of trends. Tomato prices, which had experienced a sharp increase, have now significantly declined. Additionally, core inflation has reached a four-year low. 

However, crude oil prices have risen by 10% since August, exerting upward pressure on consumer price inflation. Despite these fluctuations, it is anticipated that CPI inflation, which was at 6.83% in August, will likely come back within the RBI's target range of 2-6% in September.

As per reports, RBI is also expected to keep the retail inflation forecast unchanged at 5.4% and GDP growth at 6.5% for FY24.

“We expect RBI to keep liquidity tight in the near term to keep short-term rates elevated, given the pressure on the rupee and underlying inflation risks. We expect liquidity to normalize towards the surplus zone by early October amid the government’s month-end spending," Upasna Bhardwaj, chief economist of Kotak Mahindra Bank said.

Economists are also expecting the central bank to comment on India’s inclusion in the global bond indices starting from June 2024, as announced by JP Morgan on September 21.

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“While the index inclusion should structurally augur well for lower cost of borrowings for the economy at large, it will also come with more accountable fiscal policy-making and more deft monetary policy-making ahead—with RBI likely managing problems of plenty," D.K. Joshi, chief economist at Crisil, was quoted as saying by Mint.