RBI MPC’s 3-day meeting starts today:Governor Sanjay Malhotra to announce decision on repo rate on Aug 5

RBI’s Monetary Policy Committee’s three-day meeting started on Monday, August 3. It is believed that the central bank may keep the repo rate stable without any changes. This decision may be taken considering the inflation trend and global uncertainties. 1.25% cut in four installments in 2025 RBI’s last meeting was held in June The Reserve Bank held its second meeting of the new financial year in June. In this, the repo rate was maintained at 5.25%. However, the inflation estimate for 2027 was increased from 4.6% to 5.1%. A total of 6 meetings are to be held in this financial year, this is the third meeting of this financial year. The first meeting was held in April. RBI will not rush into interest rate changes Experts say that despite high crude oil prices and the US Federal Reserve’s hawkish stance, RBI will not rush to make any changes in interest rates right now. The central bank’s entire focus is expected to remain on domestic inflation, liquidity and economic growth. Increase possible in December Maulik Patel, Research Head at Equirus Securities, has also expressed expectations of no change in rates. He said that due to increase in petrol-diesel prices and weather impact, acceleration is being seen in wholesale and retail inflation. Due to these pressures, CPI (Consumer Price Index) is estimated to remain at 4.9 percent for the entire year. Patel said that looking at the tightening monetary policies globally, RBI will exercise caution in future decisions. Equirus Securities expects that RBI may increase by 25 basis points in the December policy review. Why does the Reserve Bank increase and decrease the repo rate? The repo rate is a tool to fight inflation. When inflation is high, the central bank tries to reduce money flow in the economy by increasing it. If the policy rate is higher, the loan that banks get from the central bank will be expensive. In turn, banks make loans expensive for customers. This reduces money flow in the economy. When money flow decreases, demand falls and inflation comes down. When the economy goes through a bad phase, there is a need to increase money flow for recovery. In such cases, the central bank reduces the policy rate. This makes the loan that banks get from the central bank cheaper and customers also get loans at cheaper rates.