A CNBC-TV18 poll shows that seven out of ten economists believe the recent weaker-than-expected GDP growth is unlikely to prompt an early rate cut, with inflation concerns expected to take priority.
The Monetary Policy Committee (MPC) is expected to keep the repo rate unchanged for the 11th consecutive meeting on Friday, December 6, citing persistent inflation concerns and global market volatility.
Instead of a rate cut, RBI Governor Shaktikanta Das may adopt a dovish tone to address growth challenges, potentially setting the stage for a rate reduction in the next meeting.
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In fact, an overwhelming 90% respondents said they expect to see the first rate cut from the MPC in the February meeting. The total quantum of cuts in the entire cycle could range between 50 to 75 basis points.
While a rate cut is ruled out with inflation above 6% there could be an explicit acknowledgement that growth needs support, and as a step towards eventual easing, the RBI may instead go for a cash reserve ratio cut, but here again, the economists are pretty divided on the possibility of this happening, with only 50% seeing the chance of a cut which could ease some pressure on the banking system liquidity.
Now the GDP forecast is also likely to grab a lot of attention. 70% of the poll respondents predict that RBI could lower its 2024-25 (FY25) growth forecast to 6.4% to 6.7%, while 20% foresee a revision all the way down to 6% to 6.3%.
In the October policy decision, RBI maintained its GDP growth projection for the fiscal year 2025 at 7.2%. As the RBI prepares for its policy meeting on December 6, here a look at what experts are saying.
On inflation, half expect the MPC to revise the current year’s projection upwards to 4.8% to 4.9% given the concerns around food inflation, while 40% expect a more modest increase.
In its fourth bi-monthly policy decision on October 9, the RBI held its inflation forecast for 2024-25 steady at 4.5%.
Apart from the policy decision, the RBI statement is also expected to focus on liquidity management, and our respondents expect that RBI will continue managing liquidity through both main and fine-tuning operations as necessary.
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