The Monetary Policy Committee (MPC) of the Reserve Bank will be meeting for three days on April 3, 5 and 6 to take into account various domestic and global factors before coming out with the first bi-monthly monetary policy for fiscal 2023-24.
The Reserve Bank on India (RBI) has been raising benchmark rates since May 2022 to contain inflation which has been largely driven by external factors, especially the disruption of the global supply chain following the outbreak of the Russia-Ukraine war.
Having remained below six per cent for two months (November and December 2022), the retail inflation breached the comfort zone warranting action by the Reserve Bank.
“Given that CPI inflation has been 6.5 per cent and 6.4 per cent in the last two months and that liquidity is now near neutral, we may expect the RBI to raise rates once again by 25 bps and probably change stance to neutral to signal that this cycle is over,” opined Madan Sabnavis, Chief Economist, Bank of Baroda.
“This is likely to be last rate hike in present policy tightening cycle,” he said, and added that inflation trajectory from here is going to decline due to impact of past policy rate hikes, softening of global commodity prices, and base effect.
The case for disengagement of the Indian monetary policy moves with the US Fed has become stronger and the probability of a pause by the RBI on rate hikes has increased, he said.
In all the Reserve Bank will hold six MPC meets in the fiscal 2023-24.
On expectations from the April MPC meet, Suvodeep Rakshit, senior economist, Kotak Institutional Equities, said the RBI had been hawkish in the last policy and has consistently highlighted the concerns on elevated core and headline CPI inflation.
Earlier this month, RBI Governor Shaktikanta Das said despite the multiple shocks to the global economy from the pandemic, the Ukraine war and synchronised monetary policy tightening across the world, the domestic economy and financial sector are stable and the worst of inflation is behind us.