Uncertainty Surrounds Food Inflation in India
In a recent interview with PTI, C.S. Setty, the Chairman of the State Bank of India, made it clear that the Reserve Bank of India (RBI) is not expected to cut the repo rate this year. This announcement comes amidst ongoing uncertainty regarding food inflation in the country. Setty noted that while the U.S. Federal Reserve may soon implement its first interest rate cut in four years, the RBI will take a more cautious approach.

RBI’s Focus on Food Inflation Before Rate Cuts
Setty emphasized that the RBI will prioritize addressing food inflation before making any decisions on interest rates. He stated, “Many central banks are making independent decisions on rates. While a cut from the Fed will influence others, the RBI will consider food inflation carefully.”

No Rate Cuts Expected in 2024
According to Setty, “We believe there will be no rate cuts during the current calendar year; we may have to wait until the fourth quarter of 2025 for any positive changes, depending on improvements in food inflation.” The Monetary Policy Committee (MPC), led by RBI Governor Shaktikanta Das, is scheduled to meet from October 7-9 to discuss interest rates.

Retail Inflation Sees Minor Increase
Retail inflation rose slightly to 3.65% in August from 3.54% in July, with food prices increasing by 5.66%. The RBI has kept the repo rate unchanged at 6.5% for the ninth consecutive time due to these inflationary pressures. The last adjustment was made in February 2023.

Regular Monetary Policy Meetings
It’s worth noting that the RBI holds monetary policy meetings every two months. These meetings involve a six-member committee, including three RBI officials and three government nominees, who assess economic conditions and make decisions regarding interest rates.