RBI Governor Shaktikanta Das had previously said that while there was scope for further monetary policy action, it was important to keep “our arsenal dry and use it judiciously.”
The six-member Monetary Policy Committee (MPC) headed by the RBI governor is scheduled to meet for three days starting on September 29. The MPC resolution would be announced on October 1.
At its last MPC meeting in August, the RBI kept policy rates unchanged to help control inflation that had recently passed the 6 percent mark, and said the economy is in extremely weak condition after of the pandemic. The RBI has cut official rates by 115 basis points since February.
Regarding the upcoming policy review, the industry body Confederation of India Industry said: “The RBI should maintain its accommodative stance, while avoiding a rate cut for now given the stickiness of CPI inflation. While it is critical to support growth, the RBI could wait until there is some visible moderation in inflation. ”
Expressing a similar view, Assocham Secretary General Deepak Sood said the Reserve Bank should continue its accommodative stance on policy interest rates in a more pronounced way in the wake of serious challenges due to the contraction of the economy induced by the COVID-19 pandemic.
Union Bank CEO and CEO Rajkiran Rai G believes the status quo will be maintained. “With so much high inflation, I don’t think they will cut the rate this time.”
There is scope for a rate cut, but that will happen around February, he added.
“Food inflation is likely to decline in December and release it due to good harvests and therefore the opportunity may come around February for a rate cut,” he said.
Retail inflation eased slightly to 6.69 percent in August from 6.73 percent in July.
The government has ordered the RBI to keep inflation at 4 percent (+/- 2 percent).
Aditi Nayar, ICRA’s chief economist, said inflation is expected to tighten further in September and gradually ease over the next few months, led by a base effect driven by weaker food inflation.
“However, core inflation is expected to remain stubbornly rigid around current levels. Consequently, we anticipate a prolonged pause from the MPC, despite the recession that is ongoing,” he said.
Care Ratings chief economist Madan Sabnavis also opined that it will be a status quo and there will be no change in stance, buyback rate or CRR.
“I think there have been more cases of wait and see because they have seen that inflation has been high,” Sabnavis said.
On the other hand, Anuj Puri, president of ANAROCK Property Consultants, said that the choice between lowering or retaining policy rates is definitely a dilemma for MPC this week.
He said that India’s economy is likely to contract substantially this year due to the pandemic, so obviously there are expectations of a reduction in the buyback rate.
“With the gradual recovery in demand for real estate, especially in the wake of lower stamp duty (in Maharashtra) and discounts and giveaways for developers, lower buyback rates may be the boost the industry needs to further boost property buyer activity in the upcoming holiday season, “he added. Puri opined.
Mayur Modi, co-founder and co-founder of Moneyboxx Finance, an NBFC that caters to small and medium-sized businesses, said that considering the liquidity position in the system, he does not expect the RBI to make further changes to monetary policy rates, but the RBI can use the next review meeting. as an opportunity to implement the above announcements in a better way.
“The RBI should expand or ensure that the benefits of its partial guarantee scheme and other liquidity measures are also available to the smaller unrated NBFCs,” Modi said.
Brickwork Ratings also expects RBI to keep the buyback rate at 4 percent at the next MPC meeting.
“With the current level of inflation and the prevailing uncertainty about growth prospects, BWR expects the RBI MPC to take a wait-and-see approach and hold the buyback rate at 4 percent, and continue with its monetary policy stance. accommodative in October meeting, “he said in a statement.
Shanti Ekambaram, Group President, Consumer Banking, Kotak Mahindra Bank also said that there may be no change in the buyback and reverse buyback rates with the RBI closely monitoring key macroeconomic data. MPC’s position will continue to be accommodative and supportive of economic growth.
“This is crucial as we are now in a critical phase of India’s recovery – HF data shows that many segments of the economy are moving and reaching close to 70/80 percent of pre-levels. COVID-19, “Ekambaram said.
According to the Reserve Bank of India Act 1934, the central bank must organize at least four meetings of the MPC in a year. The MPC from September 29 to October 1 would be the 25th meeting of the rate setting panel.
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