Mumbai, Dec 4 (PTI) – The Reserve Bank of India (RBI) began its final Monetary Policy Committee (MPC) meeting of 2024 on Wednesday, December 4. As inflation continues to remain above the central bank’s comfort level, economists and financial markets are expecting the central bank to hold the key interest rate steady.

The MPC’s decision, which will be announced on Friday, December 6, will be especially significant as it marks the last policy meeting chaired by Governor Shaktikanta Das in his current term, ending on December 10, 2024.

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🧾 Current Policy Landscape

The RBI has kept the repo rate unchanged at 6.5% since February 2023, after a cumulative 250 basis points hike from May 2022 to February 2023. Despite global monetary easing cycles beginning elsewhere, India’s central bank remains cautious, prioritizing inflation control over growth acceleration.

Under the government mandate, the RBI aims to maintain Consumer Price Index (CPI)-based inflation at 4%, with a margin of ±2%. Currently, retail inflation remains elevated, mainly due to volatile food and fuel prices.

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📉 Slowing GDP Growth Signals Concern

India’s economic momentum has visibly slowed. In the second quarter of FY2024-25 (July–September 2024), GDP growth decelerated to 5.4%, a sharp fall from 8.1% in the same quarter last year. This marks the lowest quarterly growth in almost two years and reflects weak performance in sectors like manufacturing and mining.

Although such a decline might typically encourage a central bank to cut rates to spur demand, the RBI has been clear in its inflation-first stance.

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🔍 What Do Economists Expect?

According to a research note by the State Bank of India (SBI), “We do not foresee a rate cut during the current financial year. The first rate cut and a potential stance shift could occur only around April 2025.”

The report emphasizes that policymakers should avoid a “knee-jerk reaction” to the slowdown, especially when headline inflation remains at “uncomfortable levels.”

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💬 Market Sentiment: Stability is Key

Mandar Pitale, Head of Treasury at SBM Bank India, commented that while a rate cut is unlikely, the RBI may opt for liquidity support through tools like:

• Phased reduction in the Cash Reserve Ratio (CRR) – a 25 basis point reduction split across two phases.

• Open Market Operations (OMO) – purchasing government securities to inject liquidity into the system.

These tools would support economic growth without undermining the RBI’s inflation-control efforts.

Atul Monga, CEO of BASIC Home Loan, believes the RBI’s likely status quo on rates will maintain stability in home loan interest rates, particularly benefiting mid-range and luxury housing markets.

“Stable interest rates promote confidence for both developers and buyers, as predictable borrowing costs are crucial for planning large investments like housing,” he noted.

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🔄 Quick Recap: Rate Hikes Since 2022

The current rate cycle began in May 2022, when the MPC raised the repo rate by 40 basis points in an off-cycle emergency meeting. This was followed by five additional hikes, resulting in a total increase of 250 basis points, bringing the rate to 6.5% in February 2023, where it has remained since.

Despite repeated calls from industry bodies for rate relief, the RBI has chosen to pause and assess, wary of lingering price pressures.

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👥 Who’s on the MPC?

The Monetary Policy Committee is a six-member panel comprising internal RBI officials and external experts. The current MPC members are:

• Shaktikanta Das – Governor, RBI (Chairperson)

• Michael Debabrata Patra – Deputy Governor, RBI

• Rajiv Ranjan – Executive Director, RBI

• Saugata Bhattacharya – Economist

• Nagesh Kumar – Director, Institute for Studies in Industrial Development

• Ram Singh – Director, Delhi School of Economics

This committee is tasked with setting the country’s interest rates and maintaining price stability while supporting growth.

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🍚 Inflation: Still a Worry

Though core inflation (excluding food and fuel) has eased slightly, headline inflation remains elevated, largely due to volatile food prices, supply chain constraints, and geopolitical uncertainties affecting crude oil and global commodities.

The RBI has repeatedly stated that supply-side pressures, including climate-related risks like El Niño, can keep food prices high, limiting its ability to cut rates prematurely.

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🏠 Impact on Real Estate and Borrowers

With the repo rate likely to remain unchanged, home loans, car loans, and business loans are expected to retain their current interest rates, ensuring loan EMI stability for both new and existing borrowers.

In the real estate sector, a stable rate regime means greater planning certainty for developers, especially during the high-demand season from November to March.

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📌 What to Watch on December 6?

While the repo rate is expected to remain unchanged, key takeaways from the December 6 announcement may include:

• Any shift in policy stance (from “withdrawal of accommodation” to “neutral”)

• Inflation and GDP forecast updates

• Measures to improve liquidity and credit flow

• Signals about the future rate direction in early 2025

Investors and businesses will pay close attention to Governor Das’s commentary, as it will likely provide clues about the RBI’s forward-looking strategy.

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🧭 Outlook for 2025

As global inflation cools and major central banks like the US Federal Reserve hint at rate pauses or cuts, the RBI might gain more flexibility in mid-2025 to pivot toward growth support.

However, the path ahead will depend on:

• Food and fuel inflation

• Global economic trends

• Fiscal budget 2025 announcements

• Monsoon and agricultural output

• Global conflicts impacting trade and oil prices

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📝 Conclusion

The RBI’s December 2024 policy meeting is not expected to deliver a rate cut, but it will set the tone for 2025. With inflation still above comfort levels and growth slowing, the RBI faces a delicate balancing act. The central bank is likely to hold steady for now, using liquidity tools rather than rate adjustments to support the economy.

For now, stability is the strategy—but flexibility will define 2025.