RBI monetary policy: Central bank likely to hold interest rates, policy stance-Barclays

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Barclays. The Reserve Bank Governor-headed six-member Monetary Policy Committee (MPC) meeting is scheduled for October 4-6, 2023.

The last meeting of the MPC, the highest rating-setting panel, was in August. "The RBI will have little reason to change the current policy settings, and we expect the MPC to keep the repo rate unchanged at 6.5 per cent at the October 6 meeting, flagging waning core inflation, steady economic activity, and some risks of more supply-related price shocks, providing little cue for a change in policy thinking," Barclays said in a note.

"We expect some reticence among MPC members for any dovish commentary, as the incremental negatives currently outweigh the positives and the medium-term inflation backdrop is clouded," it said. The global financial firm also pointed out that the MPC may "flag the need to persist with efforts to further transmit previous rate hikes and maintain the stance of withdrawal of accommodation." Moreover, the RBI will likely keep both its growth and inflation forecasts unchanged on an annual basis, and the focus will also be on the medium-term forecasts laid out in the October Monetary Policy Report, said Barclays.

On the liquidity front, Barclays expects the RBI to indicate its desire to maintain enough liquidity to not impair the credit creation process, especially going into the festive season. Read more: RBI likely to maintain status quo on policy rates as inflation still high: Experts In its last policy meeting in August, RBI projected real GDP growth for FY24 at 6.5 per cent with Q1 at 8 per cent, Q2 at 6.5 per cent, Q3 at 6.0 per cent, and Q4 at 5.7 per cent.

Real GDP growth for Q1FY25 is projected at 6.6 per cent. Besides, it upwardly revised the country’s retail