RBI likely to keep interest rates unchanged, experts concur

The Reserve Bank of India(RBI) in its next monetary policy review is likely to continue with the existing benchmark interest rate, according to many experts. The Monetary Policy Committee(MPC), headed by RBI governor Shaktikanta Das will meet from June 2 to June 4, after which the monetary policy will be announced on Friday. The meeting will be crucial as concerns regarding inflation are rising and the second wave of Covid-19 infections has led to a situation of economic uncertainty.

The monetary policy is announced bi-monthly and after the last meeting in April 2021, the RBI had decided to keep the interest rates unchanged. While the repo rate(the interest rate at which RBI lends to banks) was kept at 4 per cent, the reverse repo rate(the rate at which banks lend to the central bank) was fixed at 3.35 per cent.

Earlier this week, the Reserve Bank of India had released its annual report where it said that the monetary policy would be guided by macroeconomic conditions “with a bias to remain supportive of growth till it gains traction on a durable basis while ensuring that inflation remains within the target.” The report had also added that higher input costs and petroleum prices have increased the risk of inflation which will be a constrain on the Monetary Policy Committee in taking any action on the rates.

On inflation, the central government has retained its inflation target at 4% for the period of the next five years till March 2026.

According to Aditi Nayar, Chief Economist at rating agency ICRA, the pandemic has bought great uncertainty to the economic outlook. She expects the stance of the MPC to be accommodative for most of 2021,” until vaccine coverage improves dramatically.”

The stance was repeated by NARDECO national President Niranjan Hiranandani. He stressed the need to enhance liquidity in view of the pandemic particularly for the distressed industries and also called for measures to protect banks from getting more NPA’s(Non-Performing Assets).

Padmaja Chunduru, Managing Director and CEO of Indian Bank expects interest rates to be retained. “Given that the economy is not yet opened up fully and the uncertainty around vaccination is still continuing, I think they will still retain the interest rate where it is,” she said.

If the interest rates are maintained, it will be the sixth time the central bank does so. The last time the central bank changed the interests rates was in May 2020 when it cut the interest rates to a historic low.

When asked for his expectations from the MPC meeting, Andromeda CEO V Swaminathan said, “I expect the RBI to announce more steps to give our Covid-19-battered economy some room for much-needed growth.”

 

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

mersin escort