The three-day monetary policy committee meeting of the Reserve Bank of India (RBI) will begin today, Monday. Consumer inflation is still above the target range of 6%, so the committee’s position will be closely watched by the financial markets.
Bank of Baroda Chief Economist Madan Sabnavis is of the opinion that the MPC will continue to raise rates, albeit in a smaller amount.
“Against the backdrop of GDP growth slowing down and inflation exceeding 6%, the RBI will be presenting monetary policy. We in all actuality do accept that the MPC will go on with rate climbs this time however the extent will be lower – most likely 25-35 bps,” the authority told ANI.
Sabnavis is of the particular opinion that the terminal repo rate for the current fiscal year is anticipated to be 6.5%, which essentially indicates that there will be one more rate hike at the meeting in February.
“The withdrawal of liquidity will continue and it is unlikely that the stance will change. While the RBI will carefully examine both inflation and GDP projections, GDP growth may be revised downward. “In a nutshell, there won’t be any surprise for the market,” he was quoted as saying by ANI. “The global markets are also expecting more moderate increases in interest rates from the Fed.”
In order to control domestic retail inflation, which has been above the RBI’s upper tolerance limit for more than three quarters, the central bank had previously raised the key policy rate by 190 basis points to 5.9% in May. Retail inflation was 6.77 percent in October.
According to Reuters polls of economists, the central bank will most likely raise interest rates by 35 basis points, bringing them up to 6.25 percent. The RBI has increased rates by 50 basis points the past three times.
At the conclusion of the MPC’s three-day meeting on December 7, the Reserve Bank of India (RBI) will publish its next bimonthly policy review.
