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MPC meet today: RBI may slash repo rate by 25 bps to spur economic growth

MPC Meet: Reserve Bank of India Governor Shaktikanta Das-headed MPC has cut interest rates on every bi-monthly meet since he joined the apex bank last December

twitter-logo BusinessToday.In   New Delhi     Last Updated: December 5, 2019  | 08:17 IST
MPC meet today: RBI may slash repo rate by 25 bps to spur economic growth
RBI Governor Shaktikanta Das

The Reserve Bank of India (RBI) is likely to go for another interest rates cut, its sixth straight in a row, during its monetary policy announcement today. According to experts, the RBI's Monetary Policy Committee (MPC) is widely expected to slash rates by 25 basis points (bps) to 4.9 per cent, while maintaining a dovish stance.

To support the economy facing slowing down for the past six quarters, RBI Governor Shaktikanta Das-headed MPC has cut interest rates on every bi-monthly meet since he joined the apex bank last December.

In the September quarter, the GDP growth slipped further to a six-year low of 4.5 per cent, impacted by a slump in manufacturing output, which contracted by 1 per cent. The economic growth moderated from the 5 per cent rate in the April-June quarter and 7 per cent in the July-September quarter of 2018.

Also read: RBI likely to cut repo rate, reset GDP, inflation forecast; key things to watch out for in MPC meet

The six-member MPC, which started its three-day deliberations on the policy review on 3 December, will release its resolution on the website of the RBI at 11.45 AM.

In 2019, the apex bank has already reduced the repo rate five times by a total of 135 basis points. Currently, the repo rate is at 5.15 per cent, the lowest since March 2010. In June, the apex bank reduced the repo rate by 25 bps, followed by 35 bps cut in August. In October, RBI pushed it further down by 25 bps to 5.15 per cent.

In its October policy, the central bank projected GDP growth at 6.1 per cent and CPI inflation at 3.5-3.7 per cent for the second half of the fiscal year 2019-20. The analysts opine the RBI may revise inflation forecast upwards to 4-4.5% and cut GDP growth forecast to around 5-5.5% for FY20.

"For the fiscal year FY20, our real GDP forecast stands at to 5.2 per cent, with risks to further downside. After 135 basis rate cut delivered by the RBI since February 2019, we expect the RBI to cut rates by an additional 25 bps in December, taking the repo rate to 4.90 per cent," said analyst at Yes Securities.

The analyst at Geojit Financial Services said the RBI could go for another rate cut in December. "With the GDP growth slipping to 4.5 per cent, it is expected that RBI will go for the next round of rate cut in December," said Deepthi Mary Mathew, Economist at Geojit Financial Services.

Also read: Recession Reality Check: Not recession yet but Indian economy isn't far from it either

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