The last meeting is a second consecutive scheduled review of RBI policy.
The Monetary Policy Committee led by RBI Governor Shaktikanta Das will reveal its policy decision today at the end of talks that began Wednesday. Most economists expect the central bank to keep policy rates at existing levels, as inflation has remained above its comfort zone for five consecutive months, amid a surge in food prices. , despite the strategic removal of restrictions related to COVID-19. The RBI’s monetary policy panel has three new external members, whose delayed appointment by the government forced the central bank to postpone its bi-monthly review, originally scheduled for September 29 to October 1.
Here are 10 things to know about the RBI decision that needs to be made today:
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When Governor Shaktikanta Das addresses the media today at 10 a.m., all eyes will be on any signs of further monetary easing in the coming months, at a time when global financial markets are divided on the outlook. of greater stimulus to support economies against COVID-19. . (Also read: M Rajeshwar Rao is the new RBI Deputy Governor)
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The RBI is expected to keep the buyback rate at the existing 4 percent, according to 66 respondents in a Reuters news agency survey. A large majority in that survey see no cuts until the fourth quarter (January-March) of the current financial year.
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The central bank, since late March, has cut rates by 115 basis points in response to the COVID-19 pandemic. However, it is expected, for the first time since February, to provide guidance on economic performance amid the coronavirus pandemic that is still spreading and also provide insights on inflation and growth.
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The new members of the Monetary Policy Committee, who will be part of today’s decisions, are Ashima Goyal, member of the economic advisory council of Prime Minister Narendra Modi, Shashanka Bhide, senior adviser of the National Council for Applied Economic Research think tank, and Jayanth Varma. , professor of finance and accounting at IIM Ahmedabad. They replace Chetan Ghate, Pami Dua and Ravindra Dholakia.
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Few economists are hopeful that the new members will bring new ideas to current politics, which is sorely needed given the unprecedented situation caused by COVID-19, which led the country to the world’s biggest lockdown in late March. However, the government has been lifting the restrictions in phases since June, although infections continue to rise.
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“We do not believe that the new appointments will drastically change the outlook on monetary policy in the short term,” said Rahul Bajoria, an economist at Barclays. “Given our new inflation forecast trajectory, we believe that the room to cut rates further will likely open only in the first quarter of 2021.”
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The delay in the committee meeting and the ensuing political decision ran the risk of causing even greater uncertainty in India, the world’s leading economy hardest hit by the pandemic. The country’s GDP contracted a record 23.9 percent in April-June.
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The latest meeting is a scheduled second consecutive review of RBI policy, following emergency meetings in March and May, rather than April and June, and comes at a time when the country’s macroeconomic situation is changing rapidly.
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Typically, the RBI has focused on keeping consumer inflation, or the rate of increase in retail prices for a basket of commodities, in check. But the pandemic has pushed the RBI to shift gears to target economic revival for the time being, with the most recent of the central bank’s moves aimed at balancing growth with financial stability.
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Analysts say the RBI’s Monetary Policy Committee will maintain its “accommodative” stance on monetary policy, ruling out any hike in the key rate for now, in light of the COVID-19 situation. The RBI has already said that it will continue its current stance for as long as it takes to reignite growth.
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