Rbi’s monetary policy committee begins discussions on next fortnightly policy

The Reserve Bank of India’s rate-setting panel began talks on Wednesday to firm up the next fortnightly monetary policy as it is expected to maintain the status quo on the interest rate but changes its monetary policy amid rising inflation due to geopolitical developments.

The Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, is holding its first meeting in the current fiscal year. The meeting will take place from April 6 to 8 and the result will be announced on April 8.

Over the past 10 meetings, the MPC has left the interest rate unchanged and also maintained an accommodative monetary policy. The repo rate or short-term lending rate was last cut on May 22, 2020. Since then, the rate has remained at an all-time low of 4%.

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In a report this week, the State Bank of India (SBI) said the central bank could significantly raise its inflation projections for the 2022-23 financial year and also lower its growth projections. He expects the RBI to follow up with a pause on the short-term lending (repo) rate.

“A protracted stance of support for growth may have created a problem of signal extraction and coordination with the cut in administered rates even as inflation continued to rise,” SBI said in the report.

According to the report, real rates have been negative for a persistent period and “perhaps the RBI would like to strike a divisive note by highlighting inflation as a threat but at the same time stressing that it is fully seized of it!”

Chairman of industry body PHD Chamber Pradeep Multani said on Wednesday that the economy was still recovering from the disheartening impact caused by the coronavirus pandemic and that accommodative policy at this stage would be inevitable for strengthen economic fundamentals.

“Although recent geopolitical developments are fueling inflation, the status quo of policy rates will help the economy weather the impact of external shocks,” he said. The ongoing conflict between Russia and Ukraine and soaring oil prices are pushing up the cost of raw materials, leading to rising inflationary trends.

The government has mandated the central bank to keep inflation at 4%, with an upper and lower tolerance level of 2%. After the MPC meeting in February, the RBI had decided to keep its policy rates at historically low levels for the 10th consecutive meeting in order to support a sustainable recovery in the economy.

(Edited by : Jomy Jos Pullokaran)

First post: STI


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