RBI expected to slow down rate hikes as MPC starts 3-day meeting

The recent 10 per cent drop in wheat prices, after an e-auction for the open market, has relieved the pressure of inflation on Indian kitchens. The move comes at a time when inflation is expected to remain above pre-pandemic levels, despite easing in 2023 and 2024. With all eyes on India's repo rate and inflation already below Reserve Bank of India's tolerance level, its monetary monetary policy committee has kicked off its meeting.

The three-day meet will focus on setting repo rates, which play a role in controlling price rise by buckling cashflow. The six-member committee is expected to hike repo rates, but with a reduced volume of 25 basis points from 35 basis points. But SBI's economic researchers have also highlighted a possibility of RBI doing away with interest rate hikes this week itself.

Triggered in may by the supply chain disruptions caused because of geopolitical disturbances, India's repo rate hikes have hit 225 basis points since then. The policy has been timed with interest rates going up in the US, but RBI has tried to be less aggressive, in order to ensure growth along with lower inflation. After hovering above RBI's tolerance threshold of 6 per cent for three straight quarters, inflation dropped below that after the last repo rate hike.