RBI MPC June 2024 today: From repo rate to inflation, key things to watch out for

RBI MPC June 2024: Reserve Bank of India (RBI) Governor Shaktikanta Das will unveil the second monetary policy of the financial year 2024-25 today (June 7).

This will be the first MPC decision after the Lok Sabha election results in which the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) secured a majority. The MPC’s decision is being revealed after a two-day review meeting amid strong macroeconomic indicators as the central bank will take into account global challenges.

What economists expect RBI decision on rates to be?
As per a majority of analysts and economists, the RBI is expected to keep its key repo rate unchanged at 6.5 per cent while continuing its stance of ‘withdrawal of accommodation’.

Vinod Nair, Head of Research, Geojit Financial Services, said, “The RBI is expected to maintain its current stance. Although the CPI inflation declined to 4.83 per cent from the previous month’s 4.85 per cent, food inflation remains stubbornly high at 8.7 per cent.”

Amit Goel, Co-Founder & Chief Global Strategist, Pace 360, said, ‘’The RBI is set to keep its repo rate at 6.5 per cent at its June 7 review. Policy is turning more restrictive as cooling inflation pushes up real rates, hurting growth. The RBI’s surprise record dividend payment to the government may alleviate concerns about the growth outlook.”

What you need to look out for today in RBI’s June 2024 MPC:
Inflation
India’s consumer price index (CPI)-based inflation eased to an 11-month low of 4.83 per cent in April- closer to the central bank’s target of four per cent. Aditi Nayar, Chief Economist, Head of Research and Outreach at ICRA Ltd, said, “The recent inflation data and the outlook for prices of food and commodities had suggested a status quo on the rates and stance in the upcoming June 2024 monetary policy review. This has been further cemented by the higher-than-forecast expansion in the Indian economy in Q4 FY2024, which led to the full year GDP growth printing above eight per cent. As a result, the likelihood of a stance change in August 2024 followed by a rate cut in October 2024 has eased, unless an abundantly well distributed monsoon quells food prices in a sustainable fashion.”

GDP
India’s GDP growth during FY24 grew at a rate of 8.2 per cent and economist said that this does not imply rate cuts. Sanjay Nayar, President, ASSOCHAM, said, ‘’Though inflation has started receding, the macros would become clearer only after the monsoon season plays out in September. To get a sustainable balance between cyclical consumption driven growth and inflation, Investment growth to propel supply side is key. Private more than government. Something to closely watch. In a way, RBI is following the right path for a sustainable economic growth, with a resolve to fight inflation.”