What to expect this time
The central bank has maintained the policy rate at 6.5% across the last ten meetings, even as inflation, driven by surging food prices, remains a concern. While the RBI has projected optimism about growth due to good monsoons and a potential revival in capital expenditure, recent data reveals challenges.
Economic growth slowed to 5.4% in the July-September quarter, raising fears that the central bank’s restrictive policies could be hindering activity. This has led to calls from Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal for lower borrowing costs to spur growth.
Rate cut still unlikely
Despite mounting pressure, Governor Shaktikanta Das has ruled out an immediate rate cut, even after shifting to a neutral policy stance in October. Inflation remains above the RBI’s 4% target, leaving little room for aggressive monetary easing. However, the need to balance inflation control with growth support has never been more critical.
A look back: October MPC meeting
In the previous MPC meeting, the RBI decided to hold rates steady, keeping the repo rate at 6.5%, the Standing Deposit Facility (SDF) at 6.25%, and the Marginal Standing Facility (MSF) at 6.75%. The decision, supported by five of the six members, came alongside a shift to a neutral policy stance.
The October statement emphasized balancing inflation control with growth, stating, “These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.”
Spotlight on Das’ future
This policy announcement coincides with the end of Shaktikanta Das’ six-year term as RBI Governor on December 10. Speculation about his extension or a possible successor has added another layer of intrigue. Notably, in 2021, his extension was confirmed more than a month in advance. A lack of clarity on this issue will likely dominate discussions during the policy press conference.
Content Source: economictimes.indiatimes.com