RBI policy: Why Monetary Policy Committee is likely to keep repo rate steady

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Last Updated06/08/2024

The Monetary Policy Committee (MPC) is likely to keep the repo rate unchanged in its upcoming meeting.

Experts said that the six-member MPC is also expected to continue with the monetary policy stance of withdrawal of accommodation.
The rate-setting panel of the RBI is likely to maintain status-quo for the ninth consecutive policies
Repo rate is the rate at which the RBI lends money to banks to meet their short-term funding needs.
The RBI has been raising concerns over elevated food inflation over the past many months as it could derail the disinflation path.
Headline inflation, as measured by year-on-year (y-o-y) changes in the all-India consumer price index (CPI), edged up to 5.1 per cent in June 2024 from 4.8 per cent in May.
Under the flexible inflation targeting regime, the RBI has to maintain CPI in the 2-6 per cent range. It has been targeting to bring inflation down to 4 per cent on a durable basis.
With RBI expected to leave the repo rate steady at 6.5 per cent, all external benchmark lending rates (EBLR) that are linked to the repo rate will not increase, giving relief to borrowers as their equated monthly instalments (EMIs) will not increase.
However, lenders may raise interest rates on loans that are linked to the marginal cost of fund-based lending rate (MCLR), where the full transmission of a 250 bps hike in the repo rate between May 2022 and February 2023 has not happened.
Economists expect the RBI to deliver the first cut in the repo rate in December 2024.