RBI Governor to announce decision on interest rate on Wed

New Delhi: Reserve Bank of India (RBI) Governor Sanjay Malhotra will announce the third bi-monthly monetary policy of this fiscal on Wednesday amid expectations of pause on interest rate after three consecutive reduction totalling 100 basis points.

Malhotra will announce the resolution of the Monetary Policy Committee (MPC) at 10 am.

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The six-member panel, headed by Malhotra, started the three-day deliberation on the monetary policy on Monday.

Experts are of the opinion that the Reserve Bank may go in for a status quo this time and wait for more macro data after the announcement by the US to impose 25 per cent tariff on Indian imports beginning August 7.

However, a section of industry players do hope for a 25 basis points rate cut on Wednesday.

Vivek Iyer, partner and financial services risk leader, Grant Thornton Bharat opined that the RBI's MPC meeting will see no rate cut and cited reasons for it.

He said the external environment continues to be too volatile and uncertain and there needs to be some more time for the monetary transmission to take effect.

"The tariff uncertainty we believe was taken into account in the earlier rate cut and hence we don’t believe that the tariff situation should substantially weigh in on the RBI decision," Iyer said.

Praveen Sharma, CEO, REA India (Housing.com) said that with the RBI having already frontloaded a 100 basis point rate cut this year, the MPC is expected to maintain the status quo in the upcoming policy announcement.

"While a lower interest rate environment is always a positive, today’s homebuyers are increasingly driven by long-term confidence rather than short-term rate fluctuations. On their part, developers are sustaining momentum by offering flexible payment plans and smart incentives that ease the financial burden and enhance buyer affordability," Sharma said.

The central bank has been tasked by the government to ensure that consumer price index (CPI) based retail inflation remains at 4 percent with a margin of 2 percent on the either side.

Based on the recommendation of the MPC, the RBI reduced the repo rate by 25 bps each in February and April, and 50 basis points in June amidst easing retail inflation.

The retail inflation is trending below 4 percent since February this year, but experts opine that the RBI would wait for more macro data before changing the existing repo rate of 5.5 percent nothwithstanding headwinds caused by tariffs announced by US President Donald Trump on imports of Indian goods.

The MPC consists of three RBI officials - Sanjay Malhotra (Governor), Poonam Gupta (Deputy Governor), Rajiv Ranjan (Executive Director) and three external members - Nagesh Kumar (Director and Chief Executive, Institute for Studies in Industrial Development, New Delhi), Saugata Bhattacharya (Economist), Ram Singh (Director, Delhi School of Economics).

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