33 C
Monday, April 19, 2021
Home Business RBI's MPC starts deliberating on next monetary policy

RBI’s MPC starts deliberating on next monetary policy

RBI’s MPC starts deliberating on next monetary policy
Image Source : PTI

RBI’s MPC starts deliberating on next monetary policy

RBI Governor Shaktikanta Das-headed rate-setting panel MPC began its three-day deliberation on the next monetary policy on Monday amid sudden surge in COVID-19 circumstances and the federal government’s current mandate asking the central financial institution to maintain retail inflation round 4 per cent. The Reserve Bank will announce the decision of the Monetary Policy Committee (MPC) on April 7.

Experts are of the view that the Reserve Bank will preserve establishment on policy charges at its first bi-monthly monetary policy assessment for the present fiscal. It can also be more likely to preserve an accommodative policy stance.

The policy repo fee or the short-term lending fee is at present at 4 per cent, and the reverse repo fee is 3.35 per cent.

Last month, the federal government had requested the Reserve Bank to keep up retail inflation at 4 per cent with a margin of two per cent on both aspect for an additional five-year interval ending March 2026.

M Govinda Rao Chief Economic Advisor, Brickwork Ratings (BWR) stated, given the rise within the unfold of coronavirus infections and the imposition of recent restrictions to include the virus unfold within the main elements of the nation, RBI is more likely to proceed with its accommodative monetary policy stance within the upcoming MPC assembly.

“Considering the elevated inflation levels, BWR expects the RBI MPC to adopt a cautious approach and hold the repo rate at 4 per cent,” Rao stated.

Rao famous that within the final MPC, RBI initiated measures in direction of the rationalisation of extra liquidity from the system by saying a phased hike within the money reserve ratio (CRR) for restoration to 4 per cent.

“In the current scenario, the RBI may like to drain in excess liquidity, while higher borrowings and the frontloading of 60 per cent borrowings in H1 FY21 may put pressure on yields, and hence, the RBI may go slow in reversing its liquidity measures announced as a COVID stimulus since March 2020,” Rao added.

Meanwhile, G Murlidhar, MD and CEO, Kotak Mahindra Life Insurance Company stated 2021 has seen an increase in yields throughout the globe in step with vaccination led optimism.

“However, the case for India is a little different this time, with rapid rise in new COVID cases over last few weeks. In upcoming policy, MPC may continue to emphasise the importance of ‘orderly evolution of yield curve’ given benign inflation trajectory and second wave headwinds to nascent growth recovery,” stated Murlidhar.

In a bid to manage worth rise, the federal government in 2016 had given a mandate to RBI to maintain the retail inflation at 4 per cent with a margin of two per cent on both aspect for a five-year interval ending March 31, 2021.

The central financial institution primarily components within the retail inflation based mostly on Consumer Price Index whereas arriving at its monetary policy. On February 5, after the final MPC meet, the central financial institution had stored the important thing rate of interest (repo) unchanged citing inflationary issues. 

Latest Business News

Source link

Most Popular