RBI monetary policy: What to expect from feb 8 decisions

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will announce its latest decision on key interest rates on February 8 following a three-day meeting in Mumbai.

RBI Governor Shaktikanta Das is scheduled to reveal the MPC's stance on the repo rate at 10am on Wednesday. The rate has been held steady at 6.5% for the past five meetings dating back to December 2022.

Prior to that, the RBI raised the benchmark rate by 250 basis points between May 2022 and February 2023, marking the most aggressive tightening cycle in decades. The last hike from 6.25% to 6.5% occurred in February 2023.

While the RBI is widely expected to stand pat this time, economists will be watching for any shifts in the central bank's accommodative policy stance and liquidity management measures aimed at addressing deficits.

"We expect the RBI to continue the pause stance in the upcoming policy," said analysts at the State Bank of India in a recent research note. "Strong US jobs data seems to have pushed back market expectations for a quick pivot to rate cuts."

SBI believes the first rate cut is likely in June 2024, with August 2024 looking like the best bet for easing. The bank sees inflation decelerating to 5.4% in FY2024 and 4.6-4.8% in FY2025, largely driven by food prices.

India's headline retail inflation rose marginally to 5.6% in December compared to 5.55% in November, remaining above the RBI's 2-6% target range.