The RBI is expected to retain the benchmark rate of 6.5 per cent in its latest bi-monthly monetary policy review, amid inflation concerns and other global factors, experts said. RBI Governor Shaktikanta Das-headed Monetary Policy Committee (MPC) started its three-day meeting on Wednesday, and the policy review will be announced on Friday morning.
“I think that between the last MPC meeting in August and this time, inflation has gone up, growth remains strong while global factors have turned a little adverse in the sense that the US Federal Reserve is still aggressive in its stance, which has led to hardening of yields. In this situation, the central bank is expected to maintain a status quo on policy rates in the ensuing policy,” Crisil Chief Economist D Joshi told PTI.
He said the RBI would focus more on inflation given that growth is strong right now, adding oil price movements need to be watched carefully, too. "We believe that the interest rates will be on the higher side, which essentially means that we will not see any rate cut this fiscal year,” Joshi said.
The Reserve Bank has been mandated by the central government to ensure the Consumer Price Index (CPI)-based inflation remains at 4 per cent, with a margin of 2 per cent on either side.
Retail inflation jumped to a 15-month high of 7.44 per cent in July, as prices of vegetables and other food items spiked, according to official data.
Chief Economist of Bandhan Bank, Siddhartha Sanyal, said, "The global macroeconomic backdrop remains complicated with uncertainties around growth. This will prompt the MPC to stay watchful, with a likely guidance of rates to remain higher for longer.
“Nevertheless, softening in prices of agro commodities since August has offered the MPC some breathing space, which will allow it to refrain from any rate action at the moment.” Founder and Director of CreditWise Capital Aalesh Avlani also said there will likely be no change in the policy rates on Friday.
The RBI started increasing the policy rate in May 2022 in tranches, in the wake of the Russia-Ukraine war and took it to 6.5 per cent in February this year. Since then, it has kept the rate unchanged in the last three successive bi-monthly monetary policy reviews.
Vice-Chairman and MD of Titagarh Rail Systems, Umesh Chowdhury, added: "The government's policies and capital spending have certainly fuelled infrastructure growth. There are a lot of opportunities for the manufacturing sector, which means the private sector would have to incur capital expenditure. For that, the interest rate regime would continue to play a very important role".