RBI MPC may maintain the status quo on August 10; comment on inflation, growth trajectory to be in focus

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inflation is likely to limit RBI's ability to lower interest rates during this year. Morgan Stanley expects India's retail inflation to leap to 6.2 per cent at the end of the quarter ended September, against its previous forecast of 5.5 per cent, due to higher food inflation. The Consumer Price Index (CPI) based inflation is, however, expected to moderate to a 5-6 per cent range during the second half of FY24.

However, a broad expectation is that the central bank will maintain a status quo on rates and stance on August 10 as its focus is on core inflation which considers the change in goods and services prices and excludes volatile food and fuel prices. According to a Mint survey of 10 economists, RBI MPC is likely to leave interest rates and policy stance unchanged at its meeting this week. All economists expect MPC to keep the repo rate unchanged at 6.5 per cent and retain the stance of withdrawal of accommodation.

All eyes will be on what the RBI thinks about India's inflation and growth trajectory. Recently Fitch Ratings downgraded the US credit ratings to 'AA+' from 'AAA' with a 'stable' outlook while Morgan Stanley upgraded India to 'overweight'. RBI MPC is expected to maintain a status quo on policy rates and stance despite a sharp spike in vegetable and pulse prices and a divergent global monetary policy cycle.

Read more: Can RBI go the Fed-way next week? A guide on investing in a high-interest rate regime Pankaj Pathak, Fund Manager- Fixed Income, Quantum AMC expects the RBI to stay on hold and maintain its policy stance. "We expect the RBI to remain on hold and maintain its policy stance as a withdrawal of accommodation. They might raise their CPI inflation forecast for FY24 by 20–30 basis points to around