The Reserve Bank of India's (RBI's) monetary policy committee (MPC), chaired by Governor Shaktikanta Das, is expected to keep the policy rate unchanged in the December deliberations.
Moneycontrol’s poll of 17 economists, bankers, and fund managers showed that the central bank is expected to keep the policy rate undisturbed for the 11th time due to higher-than-expected inflation numbers.
Along with this, economic growth slowed to a seven-quarter low of 5.4 percent year on year (YoY) in 2QFY25, due to weaker expansion in the manufacturing and consumption sectors.
On Friday, December 6, the MPC will arrive at a decision on the policy interest rate in its bi-monthly meeting, which got underway on December 4.
Most experts said that the central bank may not change its `neutral' stance. One respondent, however, expected the bank to shift gears to `accommodative.'
Apart from this, Nomura said in a report that it expects the RBI to slash the repo rate by 25 basis points (bps) in December, along with a 50 bps cut in the CRR (cash reserve ratio) .
Talk of a cut in the CRR started ever since the GDP growth rate slowed down in the September quarter. This shrunk the room for the central bank to keep the policy rate unchanged, while throwing open options like CRR cuts to drive growth without impacting inflation. The economy grew at 6.7 percent in the previous quarter and 8.1 percent a year ago (in the September quarter).
CRR is a percentage of a bank's deposits that must be kept with the central bank as a reserve. The RBI uses this tool to control inflation, money supply, and maintain liquidity in the economy. The CRR for banks now stands at 4.5 percent.
The December meeting is crucial for Das, whose term comes to an end next week. He has not yet got an extension from the government, and has his work cut out in what may be the last MPC huddle before his term ends.The Governor needs to address slow growth (which calls for a rate or CRR cut) while containing inflation (which calls for holding rates steady).
On November 26, Moneycontrol had reported, citing sources, that the Governor may get an extension after his second term ends on December 12.
According to highly-placed sources, Das is seen as a strong candidate who has handled a sensitive position well.
What is unclear at this juncture is whether he would get a full three-year term. “It is anticipated that he would continue in office for two more years after his current term ends on December 12,” said a person with knowledge of the matter.
Another person said a potential third term for Das is under consideration and may be announced soon.
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