The three-day meeting of the Reserve Bank of India’s Monetary Policy Committee (MPC) began here on Wednesday. It is believed that due to the high level of retail inflation, the central bank’s monetary review meeting will keep the interest rates unchanged.
The results of the meeting will be announced on December 4
The Reserve Bank’s last monetary review meeting in October also did not change interest rates due to high inflation. In recent times, inflation has crossed six percent. The Reserve Bank estimates that the Indian economy will decline by 9.5 percent in the current financial year due to the Kovid-19 epidemic.
The central bank has cut the policy rate or repo rate by 1.15 percent since February this year. Experts believe that the Reserve Bank will not cut policy rates due to high consumer price index inflation. Amar Ambani, senior president and head of institutional research at Yes Securities, said the cyclical indicators and GDP data showed a significant improvement in economic activity, while retail inflation remained high. As such, we believe there will be no policy rate cut in the December monetary review. With this, the scope of a 0.25 percent reduction in interest rates in the February 2021 monetary review is also getting bleak.
Ambani, however, said that the Reserve Bank may increase its growth forecast. Care Ratings chief economist Madan Sabnavis said the Monetary Policy Committee would look at the initial recovery in the domestic economy before taking any decision. It will also consider the risks of the economy going down. He said that he believes the Reserve Bank will continue its soft stance while maintaining the policy rate at four per cent.
Sachin Chhabra, founder of Peel-Works Pvt Ltd, said that the intervention by the government through incentive measures and monetary policy by the central bank has normalized many sectors of the economy. However, a lot more needs to be done for the MASME and SME sector. He said that we believe the Reserve Bank will continue its soft stance. A report by Brickwork Ratings stated that the economy is continuing to decline. In such a situation, we believe that the MPC will continue its soft monetary stance.
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