MUMBAI : Amid the uncertainty created by the upsurge in coronavirus cases, the Reserve Bank of India (RBI) is expected to maintain the status quo in its next monetary policy review and wait a bit longer before taking measures to stimulate the growth.
The RBI is expected to announce its first bi-monthly monetary policy for fiscal year 2021-22 on April 7, 2021 after a three-day meeting of the Monetary Policy Committee (MPC) chaired by RBI Governor Shaktikanta Das. On February 5, after the last MPC meeting, the central bank kept the key interest rate (repo) unchanged, citing inflationary concerns.
According to experts, the RBI should continue its accommodative monetary policy and wait for the opportune moment to announce monetary action in order to ensure the best possible result in terms of stimulating growth without sacrificing the main objective of containing inflation.
In a report, Dun & Bradstreet said the recent increase in COVID-19 cases and restrictions imposed by several states will impose additional uncertainty and obstacles to the pace of the resumption of industrial production.
Dun & Bradstreet’s chief global economist Arun Singh said long-term yields are tightening, causing borrowing costs to rise.
“In this context, the Reserve Bank of India faces the difficult task of managing inflationary pressures while preventing a rise in the cost of borrowing.
“Despite mounting inflationary pressures, we expect the RBI to keep the policy repo rate unchanged in the next monetary policy review given the uncertainty posed by the sharp increase in COVID-19 cases.” , did he declare.
Asked about his expectations for the next MPC, ANAROCK Property Consultants chairman Anuj Puri said that with consumer inflation fluctuating and not yet stable and the key repo rate was Also significantly reduced by 115 basis points since February 2020, the RBI may consider keeping rates. waiting.
“He is likely to keep an eye on developments in inflation and economic recovery in the months to come amid the increase in COVID-19 cases in the country.
“India is witnessing a second wave with partial closures imposed in different states and cities. In such a scenario, it is likely that the RBI will maintain the status quo,” he said.
Further, Puri added that while the real estate industry’s eternal hope rests on lower interest rates, the lowest current mortgage rates starting at 6.70% are attractive enough for home buyers. House.
In a recent report, UBS Securities India economist Tanvee Gupta Jain expected the RBI to maintain comfortable short-term liquidity in order to disrupt the government’s borrowing program as little as possible and support the economic recovery at a time when COVID-19 cases are resurfacing in India.
“We continue to expect the central bank to continue to normalize its policy in the second half of FY22 in order to contain inflationary pressures and preserve financial stability.
“In our baseline scenario, we expect the MPC to take a neutral policy stance and / or pursue reverse repo rate hikes (25-40bp) without resorting to key rate hikes (repo) in FY22. We expect the reverse repo rate to be raised by 50 basis points, but only towards H2FY23, ”Jain said.
Meanwhile, a report by Anand Rathi said the reversal of the slowing trend in retail price inflation seen over the past three months would put pressure on the RBI to review the extent of the accommodation. monetary and liquidity.
“Tightening core inflation would be a particular unease. Despite this, lingering concerns about growth should keep monetary policy accommodative into 2021,” he said.
The policy rate for reverse repurchase agreements or short-term loans is currently 4 percent and the reverse repo rate is 3.35 percent.
The RBI maintained the status quo after May of last year.
The RBI last revised its key rate on May 22, 2020 in an off-policy cycle to revive demand by lowering the interest rate to a historically low 4%.
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