MPC to opt for pause

'WITHDRAWAL OF ACCOMMODATION' LIKELY TO STAY

- PIYUSH SHUKLA

FE POLL OF ECONOMISTS

AT ITS MEETING on June 8, the Reserve Bank of India's (RBI) monetary policy committee (MPC) will likely vote to keep its benchmark repo rate unchanged at 6.50%, 14 economists polled by FE said.

A higher-than-expected gross domestic product (GDP) growth of 6.1% in the fourth quarter of FY23, retail inflation easing to an 18-month low of 4.70% in April and expectation of further correction in retail inflation in May are the key reasons cited by economists for a rate pause. After raising the repo rate cumulatively by 250 basis points since May 2022, the MPC had voted unanimously for a pause in April.

Another reason why the RBI may keep the policy rate unchanged in the near term is the scaling down of rate hikes by central banks in advanced countries and the likely policy rate pause in these countries in the near future, Sujan Hajra, chief economist and ED, Anand Rathi, said.

Radhika Rao, executive director & senior economist at DBS Group Research, expects the monetary policy committee to vote unanimously for a pause. "The decision to extend the stance could see a split vote as the doves prefer to close the door on further tightening as inflation beats a retreat. We feel 2QFY23 inflation will undershoot RBI's forecasts," Rao said.