RBI Expected to Maintain Repo Rate Amidst Inflation Concerns

Experts predict the Reserve Bank of India (RBI) will keep the repo rate unchanged at 6.5% in its upcoming policy review. The Monetary Policy Committee (MPC) meeting begins tomorrow, and inflation, particularly in the food sector, remains a significant concern for the central bank.

The Reserve Bank of India (RBI) is unlikely to alter its repo rate, according to expert forecasts. The three-day Monetary Policy Committee (MPC) meeting to determine policy rates commences on August 6. The current repo rate has been steady at 6.5% since its last increase in February 2023.

"Our assessment is that the MPC will maintain its 'withdrawal of accommodation' stance and keep the repo rate unchanged for the ninth consecutive review," stated Manoranjan Sharma, Chief Economist at Infomerics Ratings, in pre-policy expectations. The MPC, led by Governor Shaktikanta Das, will convene in Mumbai amid a challenging economic environment.

The central bank's position on interest rates has garnered significant scrutiny, especially in light of persistent inflationary pressures in the food sector. Governor Das had previously indicated that food inflation remains a concern and that the RBI is not hastening any decision on rate cuts.

Recently, an SBI report projected consumer price inflation in India to hover around 5% for the financial year 2024-25, except for September and October. Inflation for agricultural and rural laborers surged to 7.02% and 7.04% respectively in June 2024, according to data from the Union Ministry of Labour and Employment.

Inflation for rural laborers has shown an upward trend over the last two months, peaking at 7.04% in June from 6.96% in April. Despite steady economic growth, significant inflation concerns persist, underscored by inflation breaching the 5% mark in June 2024 and stubborn food inflation, noted Sharma.

Wholesale inflation in India, measured by the Wholesale Price Index (WPI), rose to 3.36% in June from 2.61% in May, as per official data from the Commerce Ministry. The increase is attributed to higher prices in various categories, including food articles, food product manufacturing, crude petroleum, natural gas, and other manufacturing sectors.

(With inputs from agencies.)