Will RBI give the gift of cheap interest rates? Monetary Policy Committee meeting will start from tomorrow

New Delhi: The three-day meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will begin from Monday (7 October). After the meeting, the committee chairman and RBI Governor Shaktikanta Das will inform about the decision on the repo rate on Wednesday (9 October). In such a situation, the big question is whether the EMI of home loans will be reduced or not before the coalition government is formed.

According to experts, there is no possibility of a cut in the key interest rate repo in the RBI’s MPC meeting. That is, the EMI of your loan is neither going to increase nor decrease. Experts say that retail inflation is still a matter of concern and the West Asia crisis is likely to worsen, which will affect crude oil and commodity prices.

Earlier this month, the government reconstituted the RBI’s rate-setting committee MPC. The reconstituted committee with 3 newly appointed external members will start its first meeting on Monday. The Reserve Bank of India has kept the repo rate unchanged at 6.5 per cent since February 2023. Experts believe that there is scope for some relaxation in it in December itself. The government has tasked the RBI to ensure that the Consumer Price Index (CPI) based retail inflation remains at 4 per cent (2 per cent up or down). Experts believe that the RBI will likely not follow the US Federal Reserve, which has reduced benchmark rates by 0.5 per cent. The RBI will also not follow the central banks of some other developed countries, which have reduced interest rates.

Bank of Baroda Chief Economist Madan Sabnavis said, “We do not expect any change in the repo rate or the stance of the MPC. The reason for this is that inflation will remain above 5 per cent in September and October. Apart from this, core inflation is gradually increasing.” Sabnavis said that apart from this, the recent Iran-Israel conflict may deepen further, and there is uncertainty here. Therefore, the status quo is the most likely option for new members as well. Inflation forecast can be reduced by 0.1-0.2 per cent and there is no possibility of any change in GDP forecast.

ICRA Chief Economist Aditi Nair said that given the GDP growth being lower than the MPC’s estimate in the initial first quarter and retail inflation being low in the second quarter, we believe that it may be appropriate to change the stance to ‘neutral’ in the policy review of October 2024. He said that after this the repo rate may be cut by 0.25 per cent in December 2024 and February 2025. Signature Global (India) Ltd. Founder and Chairman Pradeep Agarwal said that home buyers along with the real estate industry and developer community are expecting a cut in interest rates, but the central bank will probably keep the interest rates unchanged for the tenth consecutive time.