Monetary Policy October 2023: RBI may keep repo rate maintained at 6.5%

Most analysts anticipate that the repo rate will remain at 6.5% and that the policy stance will shift to one of withdrawal of accommodation.

Read more: RBI Monetary Policy 2023: What factors influence policy rate?

The central bank will increase the money supply to spur economic growth if it adopts an accommodating approach. Reducing the money supply in the system as a result of the withdrawal of accommodations will further control inflation.

Despite the fact that core inflation has continued to fall, retail inflation remains beyond the RBI's target band, and the central bank may maintain a tight eye on the monsoon's inconsistent rains and rising crude oil prices.

Core inflation measures changes in the prices of goods and services, excluding prices of food and energy because their prices are substantially more volatile. It is most commonly determined by the consumer price index (CPI), which is a pricing index for goods and services.

Inflation has been uneven since the last policy announcement in August. Tomato prices, which had previously soared, have dropped, and core inflation has fallen to a four-year low. Crude prices, on the other hand, have risen 10% since August, putting pressure on consumer price inflation. CPI inflation, which was 6.83% in August, is likely to fall within the RBI's 2-6% target range in September.

Economists predict the RBI to maintain its FY24 retail inflation forecast of 5.4% and GDP growth of 6.5%.

Liquidity, which was previously in surplus, fell into deficit after the RBI implemented the 10% incremental cash reserve ratio (ICRR) in the previous policy. The market anticipates that the RBI would have adequate liquidity on hand to ensure that loan demand does not suffer throughout the festive season.

The RBI governor will make the latest monetary policy statement at 10 a.m. on Friday, October 6, including a decision on key policy rates such as the repo rate, reverse repo rate, and so on. He is anticipated to discuss the present domestic and global economic situation.

Following the policy announcement, the governor of the RBI will hold a press conference at 12:00 noon on Friday.

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