The Indian economy grew 7.6 per cent during the July-September quarter of the current financial year 2023-24 (Q2FY24), remaining the fastest-growing major economy in the world, according to the GDP data. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy - helping the inflation rate decline. With sticky retail inflation - breaching the MPC's upper threshold of 6 per cent and the US Fed's persisting hawkish stance, the RBI is likely to keep the repo rate unchanged. The RBI has been mandated by the government to ensure the consumer price index (CPI)-based inflation remains at 4 per cent, with a margin of 2 per cent on either side. However, there is still a need to guard against risks from recurring weather-related events and rises in global energy prices. MPC members noted that if the inflation projections of 5.2 per cent in Q4 2023-24 and 4.3 per cent in Q4 2024- 25 hold, the alignment of inflation to the target could be underway. Hence, the RBI's monetary policy needs to remain actively disinflationary, it said in its MPC minutes. The central bank, in its October MPC minutes-of-the-meeting, highlighted that India's headline inflation is ruling above the tolerance band and its alignment with the target is getting interrupted. India's consumer price index (CPI)-based inflation eased to a four-month low in October at 4.87 per cent from 5.02 per cent in September, edging closer to the central bank's target of 4 per cent. Here are the key indicators to watch out for during the December 2023 MPC: Inflation: De Silvia added that she expected the central bank to start its easing cycle in the second half of 2024, much later than most major emerging economies. "An economy on fire, and the persistent food inflation threat, suggest to us that the RBI will be in no hurry to loosen policy," Capital Economics' Thamashi De Silva said. Analysts also say that the central bank may start easing monetary policy in the second half of 2024. ‘’We expect the Reserve Bank of India to remain hawkish at the upcoming policy as growth continues to show strength while inflation risks linger on,'' Sakshi Gupta, Principal Economist, HDFC Bank, Gurugram. However, the recent decline in crude oil prices and bullish economic growth in the July-September quarter are likely to keep the MPC's focus on inflation. Analysts also do not expect the central bank to change its stance from ‘withdrawal of accommodation’. Economists expect RBI to hold rates steadyĪccording to the majority of economists on D-Street, the RBI would keep its key repo rate unchanged at 6.50 per cent at the conclusion of the December 6-8 MPC meeting, continuing its hawkish stance.
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