The RBI’s monetary policy committee (MPC) meeting from October 7-9 is unlikely to cut the benchmark interest rate and a dovish tone could set the direction moving forward, industry experts said on Sunday. After the US Fed rate cut, all eyes are on the RBI MPC meeting scheduled to be held on October 7-9 whether it will follow the path shown by the Fed by starting the rate cut cycle or continue to maintain the status quo on both the policy rates and stance.

“We feel that the MPC would continue to maintain status quo on the policy rates, since it would like to start the rate cut cycle once it gets convinced that CPI inflation has been controlled in a relatively durable way and it will not be vulnerable to the food inflation fluctuations intermittently,” said Ajit Banerjee, President and Chief Investment Officer, Shriram Life Insurance Company.

Further, India, as of now, doesn’t face the challenge of the GDP growth falling consistently. The modest GDP growth numbers of 6.7 per cent in Q1 were primarily driven by adverse base effect and a slowdown in government-driven investment expenditures due to general elections in Q1. The government capex resumed in Q2 and, therefore, GDP growth numbers would fall in line with RBI projections.

There would also be reconstitution of the MPC this time with the appointment of three external members, so it seems to be unlikely that we can expect any significant change in this meeting. That said, a shift to a neutral stance isn’t completely ruled out. A dovish tone in the governor’s commentary could also set the direction moving forward,” Banerjee explained.

Taking into consideration the current domestic growth inflation dynamics, with strong GDP growth and higher near-term inflation projection, the internal members are expected to stay tuned on extended policy rate hold with no urgency of immediate easing to support growth. MPC has persistently advocated a restrictive policy until inflation aligns durably towards the 4 per cent target.

According to Mandar Pitale, Head Treasury, SBM Bank India, the RBI MPC is also expected to deliberate upon the global factors such as growth inflation behaviour in developed economies, their rates actions happened in the immediate past, and the quantum of rate actions expected in the near future amidst uncertain, nonlinear forward guidance on rate cuts coming from them indicating major challenges in store.