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Published: Apr 4, 2023
Updated: Apr 4, 2023

RBI's MPC Meeting Begins with Expectations of Final Rate Hike

The Reserve Bank of India's Monetary Policy Committee (MPC) began its three-day meeting on Monday to set the country's first bi-monthly monetary policy for the fiscal year 2023-24. The central bank has already raised the repo rate by a total of 250 basis points since May 2022 to control inflation, which has remained above the RBI's comfort zone of 6%. The MPC will consider various global and domestic factors before making a decision, including the recent actions taken by central banks of developed nations such as the US Federal Reserve, the European Central Bank, and Bank of England. The decision will be announced on Thursday.

Key Factors for Deliberation

Two critical factors that the MPC will focus on are elevated retail inflation and the recent actions of other central banks. The retail inflation rate breached the RBI's comfort zone in January, reaching 6.52%, and has remained high, standing at 6.44% in February. The MPC is expected to deliberate intensely while firming up the next monetary policy.

Possible Final Rate Hike

Experts predict that the RBI will raise the repo rate by 25 basis points on Thursday, which would probably be the last in the current monetary policy tightening cycle that began in May 2022. The central bank has already raised the rate six times, including a surprise off-cycle increase of 40 basis points in May 2022, and this move is expected to contain inflation. The MPC comprises three RBI officials and three external members appointed by the central government.

Outcome awaited

The outcome of the RBI's MPC meeting is eagerly awaited by economists and businesses alike, as it will have a significant impact on the country's economic growth. If the MPC decides to raise interest rates, it may lead to higher borrowing costs for businesses and individuals, potentially affecting the overall consumption and investment sentiment. It remains to be seen how the committee balances the need to control inflation while also supporting the country's economic growth