RBI likely to keep rates unchanged1 min read . Updated: 28 Sep 2020, 07:17 AM IST
The consumer price inflation for August stood at 6.69%, above the top end of RBI’s medium-term target range of 2-6% for the fifth consecutive month amid supply disruptions
The Reserve Bank of India (RBI) is likely to keep interest rates unchanged in the monetary policy committee (MPC) meeting this week, according to a Mint survey of economists and bankers.
Respondents to the poll—10 eminent economists and senior bankers—were unanimous that curbing inflation, currently hovering above 6%, remains the primary concern of the MPC.
“We do not expect RBI to cut the policy rate while keeping its stance accommodative. It could instead focus on its intention to keep bond yields contained and announce plain vanilla OMOs (open market operations) or further Operation Twists," said Abheek Barua, chief economist at HDFC Bank Ltd.
Six respondents said MPC will cut rates by 25-50 basis points before the end of March as growth concerns will likely persist. A basis point is a hundredth of a percentage point.
Several respondents said the timing of the next rate cut could well be pushed to the next fiscal unless inflation eases. RBI kept its repo rate unchanged at 4% at its meeting last month and said it would keep policy accommodative to support an economy that has contracted 23.9% in the quarter ended 30 June.
“We push back our call for another 50 bps of repo rate cuts; we now expect 25 bps cuts in April and June 2021 (versus December 2020 and February 2021 previously), as we expect inflation to be back closer to MPC’s mandated CPI inflation target of 4%," said Anubhuti Sahay, an economist at Standard Chartered Bank.
The consumer price inflation for August stood at 6.69%, above the top end of RBI’s medium-term target range of 2-6% for the fifth consecutive month amid supply disruptions. RBI, in its previous policy, said inflation will remain elevated in the second quarter but may moderate in the second half of the fiscal year. “Headline inflation is likely to ease over the next one year, below the inflation target of 4%, on the back of food inflation subsiding. We expect average headline inflation over 2HFY21 to be 4.3%, lower than the first half average of 6.6%. And, we expect it to ease further in FY2021-22 to 3.4- 3.6%, on relatively weak demand conditions," said Gaurav Kapoor, an economist, IndusInd Bank.