RBI Monetary Policy: What to expect from MPC meeting

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The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) will announce its decision on interest rates on August 6, following a meeting that began on August 4.

It is widely expected that the RBI will either cut the key rates or keep them steady, amid rising inflationary pressure and a grim economic outlook.

RBI Governor Shaktikanta Das will address the media at 12 pm on August 6.

Also read: RBI MPC meet Aug 4-6 | What happened at policy meets earlier in 2020

Around two-thirds of economists in expect the central bank to cut the repo rate by another 25 bps, according to a Reuters poll.

In May, The MPC cut the repo rate by 40 bps to 4 percent, maintaining its accommodative policy stance. In 2020, the MPC has already slashed the repo rate by 115 bps amid the COVID-19 outbreak and consequent economic fallout.

"We anticipate an asymmetric cut of 25 basis points in the repo rate and 35 basis points in the reverse repo Rate in August 2020, in a split decision from the MPC," said Aditi Nayar, Principal Economist at ICRA.

"ICRA expects the MPC to look through the recent inflation prints, and further ease policy rates during the upcoming policy review, rather than waiting for inflation to soften first," Nayar said.

Also read: RBI MPC meet | With highly uncertain inflation outlook, what a repo rate cut at this point could mean

Retail inflation, measured as Consumer Price Index (CPI) rose in June to 6.09 percent from 5.84 percent in March, breaching the central bank's medium-term target range of 2-6 percent.

Indranil Sen Gupta, India Economist at BofA Securities, is also of the view that the MPC will lower the repo rate by 25 bps.

"We think that the MPC should cut about 25 basis points on August 6 and 50 basis points in October," Sen Gupta told CNBC-TV18.

Shishir Baijal, Chairman & Managing Director, Knight Frank India also said he hopes the MPC will reduce the key policy rates.

"With Indian economy still grappling with COVID-19 crisis and prevalent demand concerns, especially in residential real estate, we hope that RBI will further cut policy rates by another 50 bps," Baijal said.