NS reserve Bank of India (RBI) monetary policy The committee (MPC) is expected to keep the prime lending rate unchanged and maintain the ‘accommodative’ stance on October 8. India’s central bank has kept the repo rate at a record low of 4 per cent for seven consecutive times in the past. This time also there will be no change. During the last meeting, RBI Governor Shaktikanta Das said, that the central bank “will continue with an accommodative stance for as long as is necessary to support growth.” Therefore, there will be no surprise in the policy stance as well. However, market watchers take a look RBI MPC meeting On Friday for advance guidance. “Monetary policy meetings have reached a stage where RBI’s decisions will be watched more keenly than the MPC,” said Suvodip Rakshit, senior economist, Kotak Institutional Equities.
The record number of COVID-19 vaccinations at home, the reopening of the economy and its V-shaped rebound to pre-pandemic levels will likely prompt the RBI to step out of emergency monetary policy settings gradually. The central bank may provide a peak of the future road map to manage liquidity as the core liquidity surplus is stagnant at around Rs 12 lakh crore. “There are implicit indications that this is already underway, even as RBI’s policy guidance depends on the accommodative end of the scale. Liquidity management takes center stage as banking system surplus remains high, further layered by the government’s cash balances, bond purchases and FX operations. An increase in the reverse repo cut-off – within the reach of the repo rate – in the recent auction, is also a sign of RBI’s unease, with overnight and short-term returns, which were earlier held up by Liquidity Surf. Radhika Rao, Senior Economist, DBS Bank, Singapore.
“In the October meeting, the markets will keep a watch on RBI’s signals to ease the liquidity crunch along with normalization of reverse repo rates,” Rakshit said.
Inflation will be a matter of concern for the six-member RBI Monetary Policy Committee, especially when global crude oil prices are touching a new high every day. The RBI has projected CPI inflation at 5.7 per cent during 2021-22, 5.9 per cent in Q2, 5.3 per cent in Q3 and 5.8 per cent in Q4 of the fiscal, broadly balanced with risks. CPI inflation for the first quarter of 2022-23 is estimated at 5.1 per cent. CPI inflation for the first quarter of 2022-23 is estimated at 5.1 per cent.
“The final CPI print that RBI takes into account in its decision making is 5.30 per cent. After an average of 5.6 per cent in Q1 FY22, we had expected an average of 5.2 per cent in the remainder of FY22. However, these calculations will probably need to be flagged due to high global commodity prices. While a fresh assessment on inflation will be awaited, it is unlikely that the RBI will change its inflation forecast for the full year from the current 5.7 per cent,” Yes Bank said in a report.
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