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Just few days ahead of the outcome of Reserve Bank of India’s (RBI’s) monetary policy meeting, SBI Research in a report said that the RBI is likely to again pause the repo rate, the rate at which the central bank lends money to banks, in its bi-monthly monetary policy. It added that the monetary policy committee will go for a ‘prolonged pause’. A monetary policy committee headed by RBI governor Shaktikanta Das will hold a three-day-long meeting with its decision be announced on June 8. 

Besides putting a brake on the interest, the report said the RBI is likely to downgrade inflation projections for 2023-24. It said there is also a possibility of a GDP growth upgrade. As per the report, retail inflation is projected to moderate to 5.2 per cent for 2023-24 in India as estimated by RBI in its April monetary policy meeting; with Q1 at 5.1 per cent; Q2 at 5.4 per cent; Q3 at 5.4 per cent; and Q4 at 5.2 per cent. GDP growth for 2023-24 is projected to be at 6.5 per cent and the SBI Research's expectations for an upgrade may have been prompted by more than estimated GDP growth India registered in 2022-23.

As per the provisional estimates released by the National Statistical Office (NSO) recently, real GDP growth for 2022-23 stood at 7.2 per cent, higher than the 7 per cent projected. In the last policy meeting in April, RBI monetary policy committee unanimously kept the repo rate unchanged at 6.50 per cent. Repo rates are already up 250 basis points from the lows of May 2022 and a full 135 basis points higher than the pre-pandemic repo rate of 5.15 per cent. Barring the April pause, the RBI raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation.