The MPC, which consists of three RBI members and three external members, will meet from October 7 to 9. (Photo: Shutterstock)
Newly appointed members of India’s monetary policy committee could see at least one dissident calling for a rate cut when the group meets next week, several economists said in separate research notes this week.
The Indian government on Tuesday named Ram Singh, Saugata Bhattacharya and Nagesh Kumar as new external members of the Reserve Bank of India’s rate-setting panel.
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The shakeup could change a recent divided view within the six-member panel, where two outside members voted for a rate cut in August arguing that high real inflation-adjusted rates could hurt growth.
The departure of the pigeons reduces the chances of a cut next week, Shilan Shah of Capital Economics said in a note.
Although 80 percent of economists polled by Reuters expect a status quo on RBI policy in October, calls for a cut or at least a change in stance have increased since the US Federal Reserve began its cutting cycle. rates last month.
“We expect the MPC to keep interest rates and stance unchanged next week, with at least one dissenting vote, likely from the new external members,” said Barclays economists Shreya Sodhani and Amruta Ghare.
Several economists pointed to an op-ed written by Bhattacharya in mid-August in which he favored rate cuts, suggesting he could be the dissenter.
“Mr Bhattacharya strongly defended the rate cuts in August, although it remains to be seen how his views have evolved since then,” said Nomura economists Sonal Varma and Aurodeep Nandi.
The MPC, which consists of three RBI members and three external members, will meet from October 7 to 9. At its August policy meeting, the panel kept the repo rate unchanged at 6.50 percent for the ninth consecutive time.
“While government-appointed MPC members are often perceived as moderates, we believe the new members will remain data-driven and focused on the inflation targeting mandate,” said Standard Chartered Bank economists Anubhuti Sahay and Saurav Anand.
“Given the likely moderation in India’s growth and inflation, we expect them to support rate cuts from December,” they said.
Sodhani and Ghare said they expect the MPC to maintain its “de-accommodation” stance given the excess liquidity conditions, suggesting the central bank is more comfortable with higher liquidity than before.
(Only the title and image of this report may have been modified by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First published: October 3, 2024 | 12:48 p.m. IS
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