What to expect from RBI MPC October 2024 meeting on Wednesday: Experts' Take

This policy is likely to be interesting, especially as new external members take position. Data in the form of a PMI dip, fall in 2-W and PV growth, dip in personal loans etc. point to a slowdown story for India.

This has led to some noises, backed by the start of a Fed rate cycle, for at least a change in the stance by the RBI, if not a rate cut. We think while growth is slowing, it is not crashing.

Even as uncertainty exists on the timing of the start of the rate cut, for sure this cycle will be shallow to the extent of only a 50-75 bps easing.

The fluidity of global narratives in conjunction with comfortable banking liquidity, easy financial conditions on net, incipient weakness in growth, noisy food inflation, and the still-elusive 4% inflation target etc, would make it tricky for the RBI to find a balance in its policy biases.

While the upcoming policy may not see any rate action, a stance change to neutral with stress on being 'actively disinflationary' would be MPC’s best bet to prepare ground for the start of a shallow easing cycle, possibly from December.

We think it will change its stance from a hawkish 'withdrawal of accommodation' to 'neutral' in the upcoming 9 October policy meeting, followed by repo rate cuts of 25bp each in the December and February meetings, taking the repo rate to 6%.

All eyes are now on the RBI MPC meeting scheduled to be held on October 7-9 whether it will follow the path shown by the Fed by starting the rate cut cycle or continue to maintain the status quo on both the policy rates and stance.

As far as our house view is concerned, we feel that the MPC would continue to maintain the status quo on the policy rates, since it would like to start the rate cut cycle once it gets convinced that CPI inflation has been controlled.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)