The first ten days of December are crucial not only from the perspective of the ongoing elections in five states but also because of RBI’s Monetary Policy Meeting (MPC). This bi-monthly exercise has gained added importance this time as it is the last one for the ongoing calendar year and one of the last before we head for the Lok Sabha polls of 2019.

Since the last MPC meet, when the interest rates were kept unchanged and the policy stance was changed from ‘neutral’ to ‘calibrated tightening’, a lot has changed. The inflation figures are under control, the crude oil prices, which had crossed the $80 mark, are hovering between $50-60, and the rupee is slowly regaining its stability. Unlike the last time, when markets were expecting a 25 basis point hike, this time the expectation is more modest.

According to Adhil Shetty, CEO, BankBazaar, status-quo would be maintained on interest rates in tomorrow’s monetary policy review. “Last month, the rupee has gained against the US dollar and moved close to Rs70 per USD. The crude oil prices too have softened significantly.

Correspondingly, retail inflation based on consumer price index also fell to a one-year low. All these factors will give RBI elbow room to keep the policy rate unchanged” he said. This would be good news for the borrowers as the interest rates would remain unchanged and keep the cost of a loan low, he added.

On the Cash Reserve Ratio (CRR) front, amount that commercial banks have to park with the RBI, Aditi Nair, Principal Economist, ICRA, believes that it would remain unchanged. “RBI is likely to address structural liquidity mismatches through open market operations and frictional liquidity mismatches through term repos with variable tenors,” she said.

However, she added, that the MPC may modestly revise its GDP growth forecast for FY 2019 downwards, in light of the sequential decline in growth in Q2 FY2019. “The GDP and Gross Value Added expansion in Q2 FY2019 is largely in line with our forecasts. Given the risks posed by the Year-on-Year rise in commodity prices and the depreciation of the rupee, as well as the availability and cost of financing for some sectors, growth in H2 FY2019 may remain similar to the initial estimates for Q2 FY2019”, she concluded.

So, the important things to watch out for, in the last MPC meet for the calendar year 2019, are the cuts in interest rates, change of stance, change in CRR, GDP and inflation forecast.