MPC likely to hold steady on rate, keep neutral stance

OMOs for liquidity infusion expected, say economists

- ANJALI KUMARI

The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India is expected to maintain the status quo on its stance at the December policy meeting, scheduled for December 3-5, according to a Business Standard poll of economists from 12 financial institutions.

They anticipate the RBI to hold a neutral stance with a dovish undertone.

As many as seven of the respondents believe no rate cut will be announced on Friday. Strong second-quarter GDP figures announced last week are a key reason many expect the rate-setting panel to maintain a pause on repo rate, which is currently at 5.50 per cent.

“Expectations built until a few days ago of a shallow rate cut of 25 basis points appear to have faded, as finer readings of the strong Q2 growth print and the evolving playbook make the choice tilted in favour of a pause in the December policy,” said Soumya Kanti Ghosh, chief economic advisor at the State Bank of India.

The domestic rate-setting committee kept the repo rate unchanged at its previous two meetings, following a 50-basis point cut in June. The December policy will be framed against the backdrop of resilient growth and extremely low inflation, turning the decision into a close call between a cut and a pause.