Reserve Bank of India Governor Shaktikanta Das
The Reserve Bank of India (RBI) is likely to maintain an accommodative stance on key lending rates as well as support growth while presenting the third bi-monthly monetary policy.
In the last MPC meeting, RBI Governor Shaktikanta Das decided to keep the repo rate unchanged and continue with the accommodative stance for as long as necessary to support growth. Since March 2020, the RBI has reduced repo rates to a record low of 4 per cent through two rate cuts of 75 bps in March 2020 and 40 bps in May 2020.
Amid rising global commodity prices and the need to contain inflation at home, a three-day meeting of the six-member Monetary Policy Committee (MPC) began on Wednesday.
Experts believe that the central bank will maintain status quo on policy rates for the eighth time in a row. The policy repo rate or short-term lending rate is currently 4 per cent, and the reverse repo rate is 3.35 per cent.
The latest statement by the US Fed Chair on possible actions if inflation doesn’t ease by the first half of 2022 is a clear start to the chatter around rate action following clarity on the taper, said Ranan Banerjee, leader (public finance and economics) at PwC India. . Time. “This will have an impact on the stance of the MPC as it will also be concerned on the inflation front as oil, natural gas and coal prices are showing no moderation and instead continue to trend upward,” he said.
However, it is highly unlikely that there will be any rate action, as inflation is within tolerance range and the 10-year yield remains slightly above 6 per cent, Banerjee said.
M Govinda Rao, chief economic advisor, Brickwork Ratings, said consumer price inflation eased from 5.59 per cent in July to 5.3 per cent in August, with the easing of restrictions due to the pandemic and improved supply conditions due to capacity utilisation. In recovery mode, there is no immediate pressure on the MPC to change interest rates or change accommodative stance.
Dhruv Aggarwal, Group CEO, Housing.com, Makaan.com and PropTiger.com, said that though most growth indicators currently show positive signs, the RBI has been asked to maintain status quo on key policy rates to maintain financial stability and boost demand. are supposed to. Ongoing festive season. He also added that home loans are currently available at interest as low as 6.50 per cent per annum.
“Continuing this historically low interest rate regime for the entire festive season is imperative for India’s real estate sector, which is the second largest employment generating sector in India,” Agarwal said.
With the RBI projecting CPI inflation at 5.7 per cent during 2021-22 – 5.9 per cent in the second quarter, 5.3 per cent in the third and 5.8 per cent in the fourth quarter of the fiscal year, the risks are broadly balanced. CPI inflation for the first quarter of 2022-23 is estimated at 5.1 per cent. CPI inflation in August stood at 5.3 per cent. Inflation data for September is due to be released on October 12.
If the RBI maintains status quo in policy rates on Friday, it will be eight consecutive times as the rate remains unchanged. The central bank last revised the policy rate on May 22, 2020 in an off-policy cycle to spur demand by cutting interest rates historically. The central government has asked the RBI to ensure that retail inflation based on the consumer price index remains at 4 per cent with a margin of 2 per cent on either side. The Reserve Bank had kept the key interest rate unchanged after the monetary policy review in August, citing inflation concerns.
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