 "BS POLL: RBI to maintain status quo on April 1")
In its maiden bi-monthly monetary policy review next week, the Reserve Bank of India (RBI) is expected to hold interest rates, on the back of softening retail and wholesale inflation.
That is the opinion from a poll by Business Standard on Monday of bankers, economists and debt market experts. They think the repo rate (at which RBI lends to banks), at eight per cent, will be kept unchanged on April 1.
RBI’s focus is now more on Consumer Price Index-linked inflation, as recommended in the Urjit Patel committee report. Retail inflation eased more than expected, to a 25-month low, in February. It rose 8.1 per cent from a year earlier, compared with 8.79 per cent in January. Even Wholesale Price Index-based inflation had eased to a nine-month low in February, to 4.68 per cent.
Experts do not expect a rate cut, despite slowing inflation. “There is no strong case for one now, as the US Fed prepares for hardening the interest rate cycle. All taken together, it is possible the system is into an extended pause on policy rates till the end of 2014,” said Moses Harding, group chief executive officer (liability and treasury management) and chief economist of Srei Infrastructure Finance.
Since September 20, RBI has raised the repo rate by 50 bps due to concerns on inflation. These were despite slowing growth, which picked up a bit only recently. Having declined for three months in a row, industrial production expanded 0.1 per cent in January, even as manufacturing woes continued, official data showed last week.
The untimely February rains have affected crops in various areas, due to which experts are flagging concerns. Speaking about the disadvantages of high inflation last week, RBI governor Raghuram Rajan said, “In the short run, there may be a cost to bring down inflation in terms of growth but probably in the long run, bringing down inflation is a good thing.”
That is the opinion from a poll by Business Standard on Monday of bankers, economists and debt market experts. They think the repo rate (at which RBI lends to banks), at eight per cent, will be kept unchanged on April 1.
RBI’s focus is now more on Consumer Price Index-linked inflation, as recommended in the Urjit Patel committee report. Retail inflation eased more than expected, to a 25-month low, in February. It rose 8.1 per cent from a year earlier, compared with 8.79 per cent in January. Even Wholesale Price Index-based inflation had eased to a nine-month low in February, to 4.68 per cent.
Experts do not expect a rate cut, despite slowing inflation. “There is no strong case for one now, as the US Fed prepares for hardening the interest rate cycle. All taken together, it is possible the system is into an extended pause on policy rates till the end of 2014,” said Moses Harding, group chief executive officer (liability and treasury management) and chief economist of Srei Infrastructure Finance.
Since September 20, RBI has raised the repo rate by 50 bps due to concerns on inflation. These were despite slowing growth, which picked up a bit only recently. Having declined for three months in a row, industrial production expanded 0.1 per cent in January, even as manufacturing woes continued, official data showed last week.
The untimely February rains have affected crops in various areas, due to which experts are flagging concerns. Speaking about the disadvantages of high inflation last week, RBI governor Raghuram Rajan said, “In the short run, there may be a cost to bring down inflation in terms of growth but probably in the long run, bringing down inflation is a good thing.”