RBI Monetary Policy: Here are 5 key things to look for

Majority of the economists and bankers who participated in a Moneycontrol poll had said that the central bank may leave the key rates unchanged.

The Reserve Bank of India's Monetary Policy Committee is set to announce its interest rate decision on April 5.

A Moneycontrol poll showed bankers and economists predict a status quo in key rates, and the majority of them expect the MPC to retain its policy stance of withdrawal of accommodation.

Here are five things to watch out for in the RBI monetary policy on April 5.

Also read: RBI monetary policy decision on April 5: Repo rate, stance and other key terms explained

Repo rate

The repo rate, at which the central bank lends short-term funds to banks, stands at 6.5 percent. The central bank has kept it unchanged since April 2023.

Will the MPC change the repo rate in this round? Unlikely.

The majority of the economists and bankers who participated in the Moneycontrol poll said the central bank may leave key rates unchanged.

Track all the updates from today's MPC outcome here

Monetary policy stance

The RBI's policy stance indicates the thinking within the MPC, the rate-setting panel. Currently, its stance is of withdrawal of accommodation.

An accommodative stance indicates that the tilt is towards a rate cut, while a neutral stance suggests rate action can happen on either side.

The majority of the participants in the Moneycontrol poll said the central bank may keep its stance unchanged, i.e. withdrawal of accommodation.

GDP growth target

In the February policy review, the RBI projected GDP growth of 7 percent for FY25.

Will the RBI tweak the growth forecast this time? Experts said the central bank may revise its projection after a surprise increase in the third quarter of FY24.

Inflation target

The inflation print in February was far above the central bank’s medium-term target of 4 percent. According to the RBI's latest forecast, retail inflation is seen at 5.4 percent for FY24, with Q4 at 5 percent.

Will the RBI lower the inflation target further?

Also read: MPC Meet: RBI to maintain status quo with a hint of caution

Economists and bankers said the central bank is likely to make minor changes in the inflation forecast due to easing fuel and cooking gas prices.

Liquidity measures

Experts are of the view that the central bank may continue to maintain the finetuning of liquidity through repo and reverse repo auctions.

Experts said the RBI may finetune overnight rates with their liquidity operations. They added that the RBI would prefer to micromanage daily liquidity positions and act accordingly. Hence, it is not expected that the RBI will announce anything in advance to manage liquidity.