The RBI Monetary Policy Committee (MPC) is set to announce the results, including key interest rates, of the three-day meeting on Thursday. Here are some details from the RBI MPC meet.

Apex Bank’s bi-monthly meet was started on Tuesday where the six-member committee will decide on the repo rate, inflation target, and other key measures.

From the last two MPCs, the RBI has taken a pause over the interest rate after a prolonged hike of 250 bps since May 2022.

Repo rate helps the banks in India to fix their interest rates on deposits as well as on loans. A high repo rate means the banks will offer higher returns on deposits, pushing people to deposit money in their bank accounts. Also, the lending rates are hiked, discouraging people from taking more loans.

Apart from repo rates, the main mandate of the MPC is to keep retail inflation under 4 per cent with a tolerance band of 2 to 6 per cent.

It is to be noted that India’s retail inflation based on the Consumer Price Index (CPI) rose to a three-month high of 4.81 per cent in June, mainly on account of the hardening prices of food.

However, it remains within the RBI’s comfort level of below 6 per cent.

“The upcoming MPC policy will see the RBI reiterating caution amid a spike in perishable food prices, even as easing core inflation and possible mean reversion in food price trends in Q4CY23 would keep the RBI on hold, with a focus on the durable elements of inflation,” said a research report by EmKay global.

Global food inflation has picked up, given extreme weather damage to crops and geopolitical risks. The upward pressure on agri-commodity prices, especially cereals, and livestock prices, may intensify ahead. Back home, an unexpected spike in perishable food prices (mainly led by vegetables) since June has been the major contributor to reversing the moderating inflation trend, the report highlighted.

Experts in the RBI MPC meet believe the upcoming MPC policy will see the RBI reiterating caution amid a spike in perishable food prices, even as easing core inflation and possible mean reversion in food price trends in 4QCY23 would keep RBI on hold, with a focus on the durable elements of inflation.

“The upcoming policy could see a cautious tone, but no change in stance or rates. Inflation forecast will likely be revised up by the RBI. We expect the RBI to stay on hold for an extended period. We do not think the RBI will precede US Fed in any policy reversal in CY24,” said Madhavi Arora, Economist Emkay Global.

The six-member MPC consists of three external members and three officials of the RBI. The external members of the panel are Shashanka Bhide, Ashima Goyal and Jayanth R Varma. Besides Governor Das, the other RBI officials in MPC are Rajiv Ranjan and Michael Debabrata Patra.