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The short-term lending rate has been increased by 40 basis points in an off-cycle monetary policy review to contain rising inflation.
Almost all experts and economists said that the MPC will decide to increase the repo rate in view of the high inflation in the country. RBI Governor Shaktikanta Das has also said that the expectation of a rate hike is meaningless.
In an off-cycle monetary policy review, the RBI’s MPC last month raised the repo rate by 40 basis points to rein in inflation. In April’s policy review, the committee had maintained status quo to keep the key policy rate at four per cent.
Apart from this, experts also said that the central bank may increase the cash reserve ratio (CRR) in one of the upcoming policies, but it will depend on how it sees durable liquidity in the next few months.
Monitoring the MPC’s policy stance will be the key, as RBI’s future policy action will depend on it. In the off-cycle policy review last month, the MPC retained its ‘accommodative’ monetary policy stance.
Deloitte economist Rumki Mazumdar said: “Despite further guidance on the monetary policy stance and raising communication-policy rates, the monetary policy stance remains accommodative. The capital outflows India has seen recently reflect the Given that, managing the liquidity position will be critical for healthy credit growth and business and consumer confidence.”
Another area of focus will be the Reserve Bank of India’s comments on inflation. Retail inflation stood at an eight-year high of 7.79 per cent in April, prompting the RBI to hike interest rates in off-cycle monetary policy last month.
In the April MPC meeting, the RBI revised its retail inflation forecast for the current fiscal year 2022-23 to 5.7 per cent, from 4.5 per cent estimated earlier.
Ashutosh Mishra, Head of Research, Institutional Equities, Ashika Group, said: “Apart from rate action, we will be closely watching any change in GDP growth projections as well as RBI’s inflation forecast. It would also be interesting to know the future guidance of RBI on managing growth inflation dynamics.
Apart from these, other major announcements, if any, related to loans, cryptocurrencies, liquidity, etc. will also be monitored.
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