The RBI’s rate-setting panel MPC began its three-day deliberations on Wednesday to finalise the bi-monthly monetary policy amid expectations that it may opt for status quo on interest rate on account of inflationary concerns.
Reserve Bank Governor Shaktikanta Das will unveil the resolution of the Monetary Policy Committee (MPC) on Friday.
Headed by the RBI Governor, the six-member MPC also includes three external members.
Experts are of the view that the RBI may prefer to wait and watch for some more time before taking any major action on the monetary policy front as the central bank’s focus is on managing inflation as well supporting economic growth.
The central bank had left the benchmark interest rate unchanged at 4 per cent at the June policy meet. It was for the sixth time in a row that the MPC maintained status quo on interest rate.
M Govinda Rao, chief economic advisor of Brickwork Ratings, said the MPC has kept key policy rates unchanged since May 2020, after having brought them down to a record low of 4 per cent from 5.15 per cent through two rate cuts (75 bps in March 2020 and 40 bps in May 2020), to assuage the economic consequences of the Covid-19 pandemic.
Moreover, the MPC has continued with the accommodative policy stance after changing it from neutral in June 2019. “We expect the RBI MPC to hold the repo rate at 4 per cent and continue to be accommodating to support the nascent recovery, in the upcoming MPC. We also expect it to sound a cautionary note and emphasise the need to closely monitor the situation,” Rao said.
