After springing
surprises in all three of its past monetary policy meetings, some analysts have
not ruled out another one from the Reserve Bank of India later today. The RBI’s
Monetary Policy Committee will be announcing its decision at 2:30 pm. The RBI
is widely expected to keep its key lending rate or repo rate steady at 6.25 per
cent. All 60 economists polled by Reuters predict that the six-member monetary
policy committee will leave the repo rate unchanged at the level where it has
been since October.
Here are 10 key
developments:
1) Investors would be
watching out for the Committee’s views on consumer inflation after prices
advanced 3.65 per cent in February from a year earlier, not far below the RBI’s
target of 4 per cent.
2) Investors are
expecting the RBI to announce measures to drain the Rs. 4 lakh crore
that has accumulated in the banking system in March, double as compared with
January.
3) This has raised
concerns about inflation at a time when the RBI is seeking to prevent rising
prices by changing its policy stance to “neutral” from “accommodative”.
4) The demonetisation
of high value notes announced last year has led to a surge in bank deposits at
a time of weak credit offtake.
5) RBI Governor Urjit
Patel’s comments on the rupee would also be closely monitored. The Indian
currency has surged over 4.5 per cent in the March quarter against the US
dollar at a time when exports are showing signs of recovery. An appreciating
domestic currency hurts exporters.
6) “In our view, the
main focus of the central bank is likely to be on liquidity absorption in order
to signal a neutral policy approach and for gaining additional headroom to
intervene in the currency market,” said HDFC Bank chief economist Abheek Barua.
7) In October, the
Monetary Policy Committee unexpectedly cut rates and then it held them steady
in December when the Street was betting on an easing move.
8) In February, the
Committee again surprised by holding rates and switching to a “neutral” stance
from “accommodative”. All decisions were taken by a unanimous 6-0 vote, further
adding to the surprise.
9) In the February
policy review, the RBI chief had said he would wait for more clarity on the inflation
trend and the impact of demonetisation on growth before making changes to the
key policy rate.
10) To justify a rate
cut this year, economists say the RBI would likely need more comfort on
consumer prices, either through a slump in food prices or an easing of core
inflation, which has stayed at around five per cent for several months.
Source: NDTV
