Whether MPC will be unanimous this time?
Will MPC return to unanimous decision this time? The Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) is meeting in Mumbai today to review the policy (repo) rate and the monetary policy stance for the next two months. My views are: Policy Rate: RBI is likely to maintain the pause in the policy rate as (i) Retail inflation, which was keeping around 4.80% since March 24, shot upto 5.08% in June 2024, more or less representing the levels that were prevalent in January and February 2024. More pertinent was the inflation of 5.66% in rural areas, where the consumption demand has surged in the last few months. (ii) Any reduction in repo rate will have an immediate impact on the lending rates to retail and MSME segments, which are now mandatorily linked to external bench mark rates (majority of banks linked their loan rates to repo rate). When inflation is nowhere near the target rate of 4%, reduction in unsecured retail credit lending rate mi...