Mumbai: The Reserve Bank of India (RBI) Governor Sanjay Malhotra will announce the policy rate today at 10 am as the three-day Monetary Policy Committee (MPC) meeting concludes on Friday.
The financial markets remain divided on expectations from the MPC, with economists largely anticipating a pause in rate action, while some industry voices believe the time is right for a rate cut.
Economists expect that the central bank may continue its current stance, supported by strong economic indicators.
The robust GDP growth of 8.2 per cent and low inflation levels may allow the RBI to hold the policy rate steady at 5.5 per cent. The contrasting macroeconomic signals have sparked debate on the direction of the monetary policy.
Speaking to ANI, Mehul Pandya, MD and Group CEO of CareEdge Ratings, said both strong GDP growth and multi-year low inflation present opposing signals for interest rate decisions.
He stated, “Both these developments (of a continued strong GDP growth and multi-year low inflationary levels) are mutually opposing forces from an interest rate perspective. Central banks usually do not tend to cut interest rates during periods of strong economic activity, represented by GDP growth. At the same time, the central banks usually respond to a low inflationary environment by cutting interest rates.”