The Reserve Bank of India may keep policy rates unchanged for the third time in a December monetary review. Experts have expressed this opinion. Experts said that the monetary policy committee (MPC) will probably not change interest rates once again due to rising retail inflation rates.
Retail inflation currently remains above the Reserve Bank’s satisfactory level. However, the growth rate of gross domestic product (GDP) in the second quarter of the current fiscal year ended in September has been negative, due to which the central bank may keep its monetary stance soft. Beyond this, interest rates can be cut if needed. The two-day meeting of the six-member Monetary Policy Committee headed by Reserve Bank Governor Shaktikanta Das will begin from December 2. The results of the meeting will be announced on December 4.
The policy rates were not changed in the last meeting of the MPC in October. This is due to the increase in inflation which has crossed the six percent level in recent times. The Reserve Bank estimates that the country’s economy will decline by 9.5 percent in the current financial year. Since February this year, the central bank has cut the repo rate by 1.15 percent. Inflation remains consistently above the Reserve Bank’s medium-term target of four per cent, said Shanti Ekambaram, president-consumer banking, Kotak Mahindra Bank Group. As such, the scope of interest rate cuts in the upcoming monetary review is limited. However, there has been an encouraging improvement in consumer demand due to the festive season. CRISIL Chief Economist Dharmakirti Joshi said that the Reserve Bank will keep the interest rates unchanged in the policy review. Expressing similar opinion, Care Ratings chief economist Madan Sabnavis said, inflation is still very high. In such a situation, the Reserve Bank has no option but to keep the policy rates unchanged. Apart from this, the scope for the cut in interest rates for the current financial year has been largely exhausted. M Govinda Rao, Chief Economic Advisor, Brickwork Ratings said that inflation based on consumer price index is now very high. In such a situation, the MPC is unlikely to change the interest rates. Anuj Puri, chairman of real estate advisor Enarock, said real estate growth is based on lower interest rates. In such a situation, we want the repo rate to be cut.
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