RBI's Monetary Policy Committee meets to curb the growing inflation rates of India

The Reserve Bank of India's six-member monetary policy committee (MPC) meeting on India’s short-term monetary policies began on Tuesday, spanning over the next three days. The results of this meeting will be announced by RBI Governor Shaktikanta Das on Thursday, August 10.

 
The recent exponential surge in the prices of vegetables and pulses, in addition to the interest rate hikes proposed by the US Federal Reserve in July, are the two main issues that the Marginal Propensity Consume (MPC) will debate and deliberate upon while determining the policy rates.

In June, India's retail inflation, indicated by the Consumer Price Index (CPI), reached a three-month high of 4.81%. The uptick was mainly due to the escalation of food prices. Despite this, the inflation rate continues to stay below the Reserve Bank of India's desired level of 6%. The inflation data for July will be made public on August 14th.

RBI, similar to many central banks worldwide, is facing challenges in reducing inflation. Experts indicate that the recent upswing in inflation is likely to constrain the RBI's ability to cut interest rates this year.

In a report by Mint, Deepak Jasani, the Head of Retail Research at HDFC Securities, pointed out that with the RBI's recent consistent decision to keep the repo rates unchanged at 6.5 percent in the last two policies, the interest rate gap between India and the US has narrowed down to only 100 basis points. Jasani doesn't anticipate any changes in India's central bank's interest rates or its stance during the policy meeting scheduled from August 8 to 10, 2023.
Multiple Experts suggests investors should place greater emphasis on market fundamentals rather than being solely fixated on the outcomes of the RBI MPC. They highlight the strong prospects of the Indian market, which have the capacity to yield significant returns in the medium to long run.