Monetary Policy: RBI to continue with its cautious pause

Chennai, Dec 5: The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) is expected to maintain the repo rate at 6.5 per cent and there would be no rate hike this fiscal, said economists at credit rating agencies and Bank of Baroda.

They also said RBI's MPC at its upcoming meeting would revise upward the gross domestic product (GDP) forecast. According to credit rating agency CARE Ratings, the RBI will continue with its cautious pause with the repo rate at 6.5 per cent.

The repo rate is the rate at which banks borrow from the RBI. "The economic outlook has improved significantly with a robust expansion of economic output in H1 led by upward surprise in Q2 GDP growth. The RBI may revise its earlier growth projections for FY24 up by about 20-30 bps," CARE Ratings said.

Despite the commendable overall economic performance, specific challenges persist in certain pockets, particularly in rural demand. Agricultural growth remains muted amid lower-than-expected kharif output and lower reservoir levels impacting rabi sowing, said CARE Ratings.

Inflation pressures eased but food prices remain a cause of concern. A decline in agricultural production could pose an additional upside risk to inflation figures.