RBI interest rate-setting panel begins deliberating on next monetary policy

The Reserve Bank’s rate-setting panel began its three-day deliberations on the next bimonthly monetary policy on Wednesday amid rising global commodity prices and the need to contain inflation in the country.

The decision of the six members of the Monetary Policy Committee (MPC) will be announced on Friday by RBI Governor Shaktikanta Das on Friday.

Experts believe the central bank will maintain the status quo on key rates for the eighth consecutive time. The key repo rate or short-term loan rate is currently 4% and the reverse repo rate is 3.35%.

Ranen Banerjee, leader (public finance and economics) at PwC India, said the US Fed chairman’s latest statements on possible actions if inflation does not subside by the first half of 2022 are a clear start. chatter around the rate action after clarity on the Hourly tap.

“This will affect the position of the MPC as it will also be worried on the inflation front as the prices of oil, natural gas and coal show no signs of complicity and instead continue to have a tendency to fall. the increase, ”he said.

However, it is highly unlikely that there will be any action on rates given that inflation is within the tolerance range and 10-year yields continue to float slightly above 6%, said Banerjee.

Mr. Govinda Rao, chief economic adviser of Brickwork Ratings, said that consumer price inflation rose from 5.59% in July to 5.3% in August, improving the supply situation thanks to With the easing of pandemic restrictions and capacity utilization still in recovery mode, there is no immediate pressure on the MPC to change interest rates or change the accommodative stance.

When asked for his opinion, Dhruv Agarwala, CEO of Housing.com Group, Makaan.com and PropTiger.com, said that while most growth indicators are currently showing positive signals, the RBI should maintain a status quo. quo on key rates to maintain financial stability and stimulate demand during the current holiday season.

He also said that home loans are currently available at an interest rate as low as 6.50 percent annual interest.

“Maintaining this historically low interest rate regime throughout the holiday season is a must for India’s real estate sector, India’s second largest job-creating sector, to regain its strength,” Agarwal added.

The RBI has projected CPI inflation at 5.7% in 2021-2022 – 5.9% in the second quarter, 5.3% in the third and 5.8% in the fourth quarter of the fiscal year, with globally balanced risks. CPI inflation for the first quarter of 2022-2023 is projected at 5.1%.

CPI inflation was 5.3 percent in August. Inflation data for September is expected to be released on October 12.

Suman Chowdhury, Chief Analytical Officer, Acuity Ratings and Research said: In line with market expectations, the RBI will continue its accommodative monetary policy in October 2021, although it is likely that it may take further steps to recalibrate the excess liquidity in the monetary system. over the next 1-2 trimester.

He further said that while the high-frequency indicators for August and September show that economic activity is reaching pre-pandemic levels and the risks of another wave of COVID are gradually diminishing, the momentum for recovery is still there. uneven and not well established in all sectors of the economy.

Sharing his view on pre-monetary policy, Sandeep Bagla, CEO of TRUST Mutual Fund, said the next two CPI inflation readings are expected to be below 5%.

“The credit draw has yet to increase significantly. While there is a lot of speculation that the time has come for the RBI to signal the withdrawal of accommodation and a change in stance, it is highly likely that the MPC will go for a standstill policy with no rate changes. repo or position, ”he said.

If the RBI maintains the status quo in key rates on Friday, it would be the eighth consecutive time that the rate has remained unchanged. The central bank last revised the policy rate on May 22, 2020, in a non-political cycle to revive demand by lowering interest rates to an all-time low.

The central government has asked the RBI to ensure that retail price inflation based on the consumer price index remains at 4 percent with a 2 percent margin on either side. The Reserve Bank had kept the key interest rate unchanged in its monetary policy review in August, citing inflation fears.

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