On Monday morning, Indian market indices moved favourably, extending gains from the previous week on speculation that the Reserve Bank of India will maintain the repo rate at its next monetary policy review meeting later this week. At the time of writing this report, benchmark indices Sensex and Nifty were trading in a range of 0.4-0.5 per cent. A consistent decline in inflation (currently at 18-month low) and its potential for further decline may prompt the central bank to put the brake on the rate again. RBI’s consistent monetary policy tightening since mid-2022 could be attributed to the substantial decline in inflation numbers in the country.
A monetary policy committee headed by RBI governor Shaktikanta Das will hold a three-day-long meeting with its decision be announced on June 8 (Thursday).
The RBI in its April meeting paused the repo rate.
SBI Research said it expects the RBI to again pause repo rate in June policy meet. “We believe at 6.50 per cent, we are in for a prolonged pause….”
Barring April pause, the RBI raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation. Raising interest rates is a tool of monetary policy that frequently works to restrain economic demand, which lowers inflation.