The RBI's Monetary Policy Committee has commenced its three-day meeting and is anticipated to maintain its current interest rates when it reveals its decision on Friday. However, the recent surge in oil prices and sustained economic growth are expected to maintain its focus on inflation.
Suvodeep Rakshit, a Senior Economist at Kotak Institutional Equities, predicts, "There has been an increase in both global and domestic risks since the August policy. The rising prices of crude oil and the strengthening dollar are impacting the depreciating Indian Rupee (INR). As major central banks in developed markets appear to be preparing for an extended period of elevated policy rates, the Reserve Bank of India (RBI) has limited room to adopt a dovish stance. The RBI is likely to maintain the policy rate at 6.5% while aiming to ensure tight liquidity.
Meanwhile, Kaushik Mehta, Founder & CEO of RUloans Distribution, highlighted that the upcoming monetary policy meeting occurs in a context of cautious optimism. We expect that the RBI will maintain interest rate stability, which holds promising prospects for borrowers, especially those considering home loans. The trajectory of the home loan market in the coming year depends on economic dynamics and consumer sentiment. If interest rates remain stable, and the economy sustains its positive momentum, we may witness an upsurge in home loan applications, particularly towards the end of the year, driven further by the festive season. Vigilant monitoring of economic indicators and central bank actions is essential for both borrowers and lenders. Likewise, this stable interest rate environment is poised to stimulate not only the car loan market but also the broader financial and lending sectors. Consumers will feel confident in financing their vehicle purchases, and we can anticipate an increase in car loan applications, boosted by favorable lending conditions and heightened demand during the festive season.
According to the CareEdge report, the potential risks to economic growth have increased since the last policy review due to a combination of domestic and global challenges. Despite the ongoing increase in inflation, primarily due to food price volatility, there are initial indications of a slowdown in food inflation. Meanwhile, core inflation remains relatively stable, with some easing observed in August. Liquidity conditions have tightened, and borrowing costs continue to be elevated. Given the current circumstances, the RBI is likely to prioritize supporting economic growth, particularly during the festive season, while maintaining caution regarding inflation. Therefore, we anticipate that the RBI will keep its policy rates unchanged, with a unanimous decision, and will adhere to its stance of 'withdrawal of accommodation.' We do not expect any further rate hikes by the RBI in this fiscal year. The MPC is anticipated to consider rate cuts after the first quarter of the upcoming fiscal year.
