MUMBAI: Amid rising global commodity prices and the need to control inflation domestically, the Reserve Bank’s rate-setting panel on Wednesday began three-day deliberations on the next bi-monthly monetary policy.
The decision of the six-member Monetary Policy Committee (MPC) will be announced on Friday reserve Bank of India Governor Shaktikanta Das on Friday.
Experts believe that the central bank will maintain status quo on policy rates for the eighth time in a row.
The policy repo rate or short-term lending rate is currently 4 per cent, and the reverse repo rate is 3.35 per cent.
The latest statement by the US Fed Chair on possible actions if inflation doesn’t ease by the first half of 2022 is a clear start to the chatter around rate action following clarity on the taper, said Ranan Banerjee, leader (public finance and economics) at PwC India. . Time.
“This will have an impact on the stance of the MPC as it will also be concerned on the inflation front as oil, natural gas and coal prices are showing no moderation and instead continue to trend upward,” he said.
However, it is highly unlikely that there will be any rate action, as inflation is within tolerance range and the 10-year yield remains slightly above 6 per cent, Banerjee said.
M Govinda Rao, chief economic advisor, Brickwork Ratings, said consumer price inflation eased from 5.59 per cent in July to 5.3 per cent in August, with the easing of restrictions due to the pandemic and improved supply conditions due to capacity utilisation. In recovery mode, there is no immediate pressure on the MPC to change interest rates or change accommodative stance.
When asked his opinion, Dhruv Agarwal, Group CEO, Housing.com, Makaan.com and PropTiger.com, said that though most of the growth indicators show positive signs at present, there is a need for the RBI to maintain status quo while maintaining key policy rates. have hope. To promote financial stability and demand during the current festive season.
He also added that home loans are currently available at interest as low as 6.50 per cent per annum.
“Continuing this historically low interest rate regime for the entire festive season is imperative for India’s real estate sector, which is the second largest employment generating sector in India,” Agarwal said.
With the RBI projecting CPI inflation at 5.7 per cent during 2021-22 – 5.9 per cent in the second quarter, 5.3 per cent in the third and 5.8 per cent in the fourth quarter of the fiscal year, the risks are broadly balanced. CPI inflation for the first quarter of 2022-23 is estimated at 5.1 per cent.
CPI inflation in August stood at 5.3 per cent. Inflation data for September is due to be released on October 12.
Suman Choudhary, Chief Analytical Officer, Acute Ratings & Research, said: “In line with market expectations, the RBI will continue with its accommodative monetary policy in October 2021, although it is likely that it will take some time to re-examine additional liquidity in monetary policy. The system may take more steps in the next 1-2 quarters.”
He further said that while the high frequency indicators for August and September suggest that economic activity is approaching its pre-pandemic levels and the risks of another wave of Covid are gradually easing, the pace of recovery is still uneven. And not all anchor well. sector of economy.
Sandeep Bagla, CEO, Trust Mutual Fund, while sharing his pre-monetary policy outlook, said that the next two CPI inflation readings are likely to remain below 5 per cent.
“Credit offtake is yet to pick up in a meaningful manner. While there is much speculation that the time has come for the RBI to return to housing and signal a change in stance, it is quite likely that the MPC opts for a status quo policy. Repo Change in rates or stance,” he said.
If the RBI maintains status quo in policy rates on Friday, it will be eight consecutive times as the rate remains unchanged. The central bank last revised the policy rate on May 22, 2020 in an off-policy cycle to spur demand by cutting interest rates historically.
The central government has asked the RBI to ensure that retail inflation based on the consumer price index remains at 4 per cent with a margin of 2 per cent on either side.
The Reserve Bank had kept the key interest rate unchanged after the monetary policy review in August, citing inflation concerns.
The decision of the six-member Monetary Policy Committee (MPC) will be announced on Friday reserve Bank of India Governor Shaktikanta Das on Friday.
Experts believe that the central bank will maintain status quo on policy rates for the eighth time in a row.
The policy repo rate or short-term lending rate is currently 4 per cent, and the reverse repo rate is 3.35 per cent.
The latest statement by the US Fed Chair on possible actions if inflation doesn’t ease by the first half of 2022 is a clear start to the chatter around rate action following clarity on the taper, said Ranan Banerjee, leader (public finance and economics) at PwC India. . Time.
“This will have an impact on the stance of the MPC as it will also be concerned on the inflation front as oil, natural gas and coal prices are showing no moderation and instead continue to trend upward,” he said.
However, it is highly unlikely that there will be any rate action, as inflation is within tolerance range and the 10-year yield remains slightly above 6 per cent, Banerjee said.
M Govinda Rao, chief economic advisor, Brickwork Ratings, said consumer price inflation eased from 5.59 per cent in July to 5.3 per cent in August, with the easing of restrictions due to the pandemic and improved supply conditions due to capacity utilisation. In recovery mode, there is no immediate pressure on the MPC to change interest rates or change accommodative stance.
When asked his opinion, Dhruv Agarwal, Group CEO, Housing.com, Makaan.com and PropTiger.com, said that though most of the growth indicators show positive signs at present, there is a need for the RBI to maintain status quo while maintaining key policy rates. have hope. To promote financial stability and demand during the current festive season.
He also added that home loans are currently available at interest as low as 6.50 per cent per annum.
“Continuing this historically low interest rate regime for the entire festive season is imperative for India’s real estate sector, which is the second largest employment generating sector in India,” Agarwal said.
With the RBI projecting CPI inflation at 5.7 per cent during 2021-22 – 5.9 per cent in the second quarter, 5.3 per cent in the third and 5.8 per cent in the fourth quarter of the fiscal year, the risks are broadly balanced. CPI inflation for the first quarter of 2022-23 is estimated at 5.1 per cent.
CPI inflation in August stood at 5.3 per cent. Inflation data for September is due to be released on October 12.
Suman Choudhary, Chief Analytical Officer, Acute Ratings & Research, said: “In line with market expectations, the RBI will continue with its accommodative monetary policy in October 2021, although it is likely that it will take some time to re-examine additional liquidity in monetary policy. The system may take more steps in the next 1-2 quarters.”
He further said that while the high frequency indicators for August and September suggest that economic activity is approaching its pre-pandemic levels and the risks of another wave of Covid are gradually easing, the pace of recovery is still uneven. And not all anchor well. sector of economy.
Sandeep Bagla, CEO, Trust Mutual Fund, while sharing his pre-monetary policy outlook, said that the next two CPI inflation readings are likely to remain below 5 per cent.
“Credit offtake is yet to pick up in a meaningful manner. While there is much speculation that the time has come for the RBI to return to housing and signal a change in stance, it is quite likely that the MPC opts for a status quo policy. Repo Change in rates or stance,” he said.
If the RBI maintains status quo in policy rates on Friday, it will be eight consecutive times as the rate remains unchanged. The central bank last revised the policy rate on May 22, 2020 in an off-policy cycle to spur demand by cutting interest rates historically.
The central government has asked the RBI to ensure that retail inflation based on the consumer price index remains at 4 per cent with a margin of 2 per cent on either side.
The Reserve Bank had kept the key interest rate unchanged after the monetary policy review in August, citing inflation concerns.
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