Reserve Bank of India Governor Shaktikanta Das will announce the decision of the six-member Monetary Policy Committee (MPC) on Friday. The central bank’s rate-setting panel started its three-day deliberations on the next bi-monthly monetary policy on Wednesday.    

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The central bank likley to retain key lending rates as well as maintain the accommodative stance to support growth during the upcoming monetary policy review, Ians reported quoting expert. If this happens, it will be the eighth time in a row when the the central bank will maintain the status quo on policy rates. The policy repo rate or the short-term lending rate is currently at 4 per cent, and the reverse repo rate is 3.35 per cent, the report says.    

On the other hand, the central bank might indicate a timeline for commencing solid tapering measure in addition to variable reverse repo rate (VRRR) operations to withdraw excess liquity, thereby, staving off inflationary pressure.    

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'Inflationary pressures as a key factor' 

In a poll conducted by IANS, economists and industry experts cited inflationary pressures as a key factor halting any further monetary policy easing.    

Ranen Banerjee, leader (Public Finance and Economics) at PwC India opined that the latest statements by the US Fed Chair on possible actions if inflation does not wear off by H1 of 2022 is a clear commencement of chatter around rate action after the clarity on taper timing, PTI reported.    

“This will have a bearing on the stance of the MPC as it will also be worried on the inflation front given the oil, natural gas and coal prices showing no signs of abetting and rather continuing to have an upward bias,” he said.     

However, it is very unlikely that there will be any rate action given the inflation is within the tolerance band and the 10-year yields keep hovering slightly above 6 per cent, Banerjee said.    

M Govinda Rao, Chief Economic Advisor of Brickwork Ratings, told PTI that the consumer price inflation easing from 5.59 per cent in July to 5.3 per cent in August, improved supply situation on the back of the pandemic-led restrictions being relaxed, and capacity utilisation still in the recovery mode, there is no immediate pressure on the MPC to either alter interest rates or change the accommodative stance.    

CPI Inflation data

Meanwhile, the RBI has projected the CPI inflation at 5.7 per cent during 2021-22 — 5.9 per cent in the second quarter, 5.3 per cent in third, and 5.8 per cent in the fourth quarter of the fiscal, with risks broadly balanced. CPI inflation for the first quarter of 2022-23 is projected at 5.1 per cent.    

The CPI inflation was at 5.3 per cent in August. The inflation data for September is scheduled to be released on October 12 

Things that can be addressed: Anil Singhvi 

Earier, speaking about how commentary on inflation will impact markets and what to expect, Zee Business Managing editor Anil Singhvi had said that he would like to clear the fact that whatever is in the hands of the RBI Governor, Shaktikanta Das, be it monetary policy, liquidity management and others are doing fine. There is also an external factor which is not in his control and that is global inflation. 

Singhvi said that there are certain issues on the supply side that can be addressed. Again, there are certain regional factors related to inflation that are specific to India. In these cases, if the central government and RBI work together then these issues can be sorted.