Last Updated on 06/08/2024 by wccexam Desk
Amid the news of a huge drop in the stock market and the signs of recession coming from America, the meeting of the RBI’s Monetary Policy Committee (MPC) has started on Tuesday, August 6. On August 8, RBI Governor Shaktikanta Das will inform about the decisions of the MPC meeting. But even before this, speculations have started that RBI will not take a decision to reduce interest rates even in the August policy meeting. It is being estimated that home loan customers will have to wait longer for a reduction in EMI. But if RBI takes a decision, it will be a big step.
According to experts, in the August Monetary Policy Committee meeting, RBI can once again keep the repo rate at 6.5 percent. Before cutting the repo rate, RBI will assess the stability of the reduction in inflation rate. The reason for this is that earlier there was a forecast of reduction in inflation rate due to better monsoon, but now it is getting blurred, because at present the monsoon is uneven across the country. Due to this, some areas are receiving more rain while in some places the rainfall is being recorded below average.
Inflation becomes the breaker of repo rate reduction!
RBI considers retail inflation as the biggest basis for reducing the repo rate. At present, despite RBI maintaining the inflation rate in the range of 2 to 6 percent, it remains close to the high level of 5.1 percent. In such a situation, RBI can wait for some more time and after examining its movement, take a decision on reducing the repo rate in the next policy.
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Although it is believed that the retail inflation rate may come down in the coming months, but due to the base effect, it is also expected to remain high. At present, one reason for not reducing the repo rate is that despite high interest rates in 2023-24, the country’s growth rate was 8.2 percent. At the same time, the figure of 4.9 percent inflation rate in the April-June quarter is also not indicating a reduction in the repo rate yet. In such a situation, RBI may decide not to cut the repo rate in the August meeting.
There is no reduction in interest rates in the US
Along with the country, foreign signals are also saying that there will be no change in the repo rate at the moment. The US central bank Federal Reserve had decided not to make any change in its interest rates in the meeting held last week. But the Fed Reserve had indicated that interest rates can be reduced in the coming months. The Bank of England has also cut interest rates, increasing the possibility of a repo rate cut in the upcoming policies. In such a situation, after the inflation pressure decreases and positive signals from the US monetary policy, RBI can also decide to reduce interest rates.
Source (PTI) (NDTV) (HINDUSTANTIMES)