On October 1st, the RBI's monetary policy meeting will decide on interest rates. While the general public hopes for a cut, economists, according to a Reuters poll, believe the RBI will maintain its key rate at 5.50%. A change in rates is unlikely due to the evaluation of the impact of previous cuts and global economic uncertainties.
RBI give Diwali gift to common people: The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) meeting is scheduled from September 30 to October 1, where the future of interest rates will be announced. This time, the general public hopes for a reduction in EMIs before Diwali. However, according to a Reuters poll and experts, the central bank is assessing the impact of previous rate cuts and is more likely to maintain its key rate at 5.50% amidst global uncertainties.
Impact of Previous Economic Activities
The year 2025 has brought relief to common people. The central government made earnings up to 12 lakh tax-free. Simultaneously, the RBI continuously cut interest rates in February, April, and June. This made loans cheaper and had a positive impact on people's finances.
Additionally, the GST Council made significant changes to indirect taxes. These changes led to a fall in prices of essential household items and several other products and services. These measures increased the spending capacity of common people.
Amidst all this, people are now expecting the RBI to reduce their EMIs and debt burden through interest rate cuts.
What the Reuters Survey Revealed
In the Reuters survey, economists stated that the RBI is assessing the impact of previous measures before changing its policy rate. The cuts made by the central bank in recent months have not fully reflected their impact on the economy. Due to increased government spending, the Indian economy grew at an annual rate of 7.8 percent in the last quarter.
The survey noted that private investment continues to decline. This implies that the steps taken earlier to ease policy have not yet had a sufficient impact. Meanwhile, inflation has remained within the RBI's target of 2-6 percent. However, the rupee has weakened against the US dollar, making imports more expensive.
Global Environment
Globally, uncertainty is also increasing. Trade tensions with the US and new visa regulations have affected India's economic outlook. Under these circumstances, foreign investors are withdrawing their capital from the Indian stock market and other assets.
The Monetary Policy Committee had unanimously decided to keep interest rates stable in August. In the Reuters survey, 45 out of approximately 61 economists predicted that the RBI would maintain stable rates in this meeting as well. Only 16 economists indicated the possibility of a 25 basis point cut.
Canara Bank Says – Interest Rates May Remain Stable Until 2025
Madhavankutty, Chief Economist at Canara Bank, stated that he does not expect interest rate cuts. He said that the RBI has already clarified that monetary policy has a limited impact on boosting growth. He explained that private investment has not increased, with stable wage growth and uncertainty regarding job stability being the main reasons behind this.
This same view was observed in the forecasts of other economists. 26 out of 50 economists believe that interest rates will remain unchanged until at least the end of 2025. Earlier in August, it was predicted that there might be a possibility of a rate cut in December.
