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RBI Monetary Policy announcement: From repo rate to inflation target, 5 things you should look out for

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC)is set to announce its interest rate decision on April 5. Here are five things to watch out for:

RBI MPC April 2024: The repo rate refers to the rate at which commercial banks borrow money by selling their securities to RBI.

Repo rate

The repo rate is the rate at which the central bank lends short-term funds to banks. It currently stands at 6.5 per cent and has been unchanged since April 2023.

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Monetary policy stance

The RBI’s policy stance shows the thinking within the MPC itself. Currently, RBI MPC’s stance is of withdrawal of accommodation. While an accommodative stance indicates that the tilt is towards a rate cut, a neutral stance suggests rate action can happen on either side.

GDP growth target

In the February policy review meeting of the MPC, the RBI projected GDP growth of 7 per cent for financial year25. The central bank may revise its projection after a surprise increase in the third quarter of financial year24.

Inflation target

The inflation in February was above central bank’s medium-term target of 4 per cent. As per the RBI’s latest forecast, retail inflation is seen at 5.4 per cent for FY24, with Q4 at 5 per cent.

Liquidity measures

The central bank may continue to finetune liquidity measures through repo and reverse repo auctions.

Could rate cuts be announced by the RBI MPC?

The State Bank of India, in its research report, stated that rate cuts are not likely in the MPC and the RBI is expected to cut rates only in the third quarter of FY25.

“Strong evidence of emerging economy central bank rate actions are predicated by advanced economy central bank rate actions…India is an exception…first RBI cut in Q3FY25…such rate cut cycle likely to be shallow,” SBI said in its report.

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