The Reserve Bank of India (RBI) is expected to maintain its key policy repo rate at 6.5% during the Monetary Policy Committee (MPC) meeting on December 6, 2024. The decision aligns with the central bank’s cautious stance amid elevated inflation levels and slower-than-expected economic growth.
Despite recent GDP data showing growth at 5.4% in Q2, significantly below the RBI’s projection of 7%, inflation concerns remain dominant. Retail inflation in October breached the upper tolerance limit of 6%, driven primarily by food prices. This scenario makes a rate cut unlikely, with the central bank opting to prioritize inflation control over growth stimulation.
Economists suggest that the RBI may revise its inflation projections upward due to persistent price pressures, despite previous expectations of moderation following a good monsoon season. The possibility of a rate cut has shifted to February 2025, conditional on inflation easing in upcoming months.
Governor Shaktikanta Das has emphasized the risks of premature easing, indicating the RBI’s readiness to act if inflationary pressures subside. The central bank’s shift to a “neutral” policy stance in October also reflects flexibility, though significant data dependence remains for any potential policy easing.
