RBI MPC: Central Bank Expected To Pause Again With Markets Watching For Shift In Stance

All 40 economists in a Bloomberg survey forecast the RBI will keep the repurchase rate unchanged at 6.50 per cent on Thursday, signalling that inflation could cool further in the months ahead

The Reserve Bank of India (RBI) is expected to pause for a second straight month as inflation eases and market watchers are looking for cues of a shift in policy stance to support growth in Asia’s third-largest economy, reported by Bloomberg. All 40 economists in a Bloomberg survey forecast the RBI will keep the repurchase rate unchanged at 6.50 per cent on Thursday, signalling that inflation could cool further in the months ahead.

According to the report, consumer price growth slowed to 18-month low of 4.7 per cent, edging toward the midpoint of the RBI’s 2-6 per cent target range. Thirteen economists expect the monetary policy committee to retain “withdrawal of accommodation” language in the statement, while three saw a dilution in the phrasing and the remaining two estimate a shift to neutral. The rest of the economists didn’t share their forecasts.

India’s latest quarterly growth figures exceeded estimates last week, bringing about an expansion of 7.2 per cent for the last fiscal year. In Q4FY22, gross domestic product (GDP) growth was 4 per cent. The country's gross domestic product or GDP expanded by 6.1 per cent in the fourth quarter (Q4) of fiscal year 2022-23, according to the official data shared by the National Statistical Office (NSO). 

Although this is slight moderation, the South Asian country is posting one of the fastest growth rates among major economies. "Amid steady growth and falling inflation, RBI can opt to watch global events unfold from the sidelines, especially given India’s improved macro stability,” said Rahul Bajoria, economist at Barclays Plc. “That should enable the full transmission of earlier policy rate hikes without necessarily being very disruptive.”

Most global central banks are pausing on further rate hikes as they assess the impact of past actions and falling global commodity prices. The US Federal Reserve may skip-a-hike when it meets next week, but the Reserve Bank of Australia unexpectedly raised key rates on Tuesday citing elevated prices.

The central bank governor warned last month that there was “no room for complacency” even if inflation has moderated. Kaushik Das, economist with Deutsche Bank AG, said the RBI may trim its inflation forecast to 5 per cent from 5.2 per cent in its last review, while retaining a 6.5 per cent growth target in the current fiscal year.