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The Reserve Bank of India (RBI) is expected to maintain the policy rate during its ongoing Monetary Policy Committee (MPC) meeting, according to a report from Union Bank. This decision comes as the central bank aims to strike a delicate balance between controlling inflation and supporting economic growth. The report suggests that the RBI is unlikely to reduce the Cash Reserve Ratio (CRR), as such a move could indicate concerns over economic growth and a potential rise in inflation.
All eyes on the RBI monetary policy tomorrow after the lower-than-expected GDP print. At least 7 out of 10 economists polled by CNBC-TV18 do not think the shocking GDP data will accelerate the rate cut cycle. @_ritusingh with the fineprint of the survey#RBI #RBIMPC… pic.twitter.com/kXWXO9LSSe
— CNBC-TV18 (@CNBCTV18News) December 5, 2024
Rather than cutting the CRR or policy rate, the RBI may focus on using alternative liquidity management tools to regulate market liquidity. These tools could include open market operations (OMOs) and foreign exchange (FX) swaps. These instruments allow the RBI to adjust liquidity without directly affecting interest rates, thus maintaining stability in both the inflation and growth fronts.
💰RBI Monetary Policy- Repo Rate to remain Unchanged? Let’s find out on 6th December, 2024
— Adroit Financial Services (@Adroit_Fin) December 5, 2024
*Based on our Company’s Analysis*#RBImonetarypolicy #RepoRate #EconomicGrowth #inflationcontrol #FinancialStability #monetarypolicy #IndianEconomy #IndianGDP #RBI #MarketStrategy… pic.twitter.com/jxwYnziyvA
The report also forecasts that the RBI may begin reducing rates in February 2025, with an initial cut of 25 basis points (bps). Another rate cut could follow in April 2025, as the central bank looks to boost economic activity while ensuring inflation remains under control. These gradual rate cuts are expected to help provide the necessary support for growth, especially in light of ongoing challenges in the global and domestic economy.
RBI MPC Meeting December 2024 Expectations Live: Will RBI announce rate cute tomorrow?https://t.co/Yk5vJeV41Y
— businessline (@businessline) December 5, 2024
Overall, the RBI’s cautious approach highlights its focus on maintaining economic stability. While it refrains from drastic rate cuts or reducing the CRR in the immediate term, it is likely to use a combination of tools to manage liquidity. As the economy continues to evolve, markets and businesses will closely watch RBI’s future decisions, especially in early 2025, to gauge the central bank's stance on inflation and growth.
