The RBI governor-headed 6-member MPC meeting is taking place between August 8 and 10, and the policy decision will be announced by Governor Shaktikanta Das on August 10
The RBI’s monetary policy committee (MPC) will decide on its monetary policy action on Thursday, the last day of its 3-day review meeting. According to experts, it is likely to keep the interest rates unchanged. The recent interest rate hike by the US Fed and the EU will lead to the postponement of the possibility of any reduction in the repo rate in the near future.
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The RBI governor-headed six-member MPC meeting is taking place between August 8 and 10, and the policy decision will be announced by Governor Shaktikanta Das on the last day of its meeting, August 10.
The MPC consists of three external members and three officials of the RBI. The external members of the panel are Shashanka Bhide, Ashima Goyal and Jayanth R Varma. Besides Governor Das, the other RBI officials in MPC are Rajiv Ranjan (Executive Director) and Michael Debabrata Patra (Deputy Governor).
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The RBI announces its monetary policy bi-monthly — every two months. Last monetary policy review took place in June 2023, two months ago. However, in extraordinary situations, the monetary policy review can also be done anytime — which is called ‘off-cycle monetary policy review’. It previously took place in May 2022, when inflation was too high.
Monetary policy is reviewed based on the prevailing and expected inflation rates in the country, in order to control price hikes.
The monetary policy also helps in stabilising India’s exchange rate.
The RBI MPC uses instruments like repo rate, reverse repo rate, statutory liquidity ratio, cash reserve ratio, etc.
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The repo rate, which started rising in May last year, has stabilised with the RBI keeping it unchanged at 6.5 per cent since February when it was raised from 6.25 per cent. Later, in the two bi-monthly policy reviews in April and June, the benchmark rate was retained.
The recent spike in vegetable prices is set to push the CPI inflation to an uncomfortable 5.3-5.5 per cent in July 2023 (whose data is scheduled to be released later this month).
Experts say the Committee will retain its hawkish tone in August 2023, keep the repo rate unchanged and signal that a pivot to rate cuts remains distant.
India’s retail inflation based on Consumer Price Index (CPI) rose to a three-month high of 4.81 per cent in June, mainly on account of hardening prices of food. The inflation, however, remains within the RBI’s comfort level of below 6 per cent. The inflation data for July will be released on August 14.
