Will RBI increase interest rate in next bi-monthly monetary policy? What experts say

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Will the RBI raise interest rates in the first monetary policy of the current financial year? Which is what the experts say

The Reserve Bank of India’s rate-setting panel on Wednesday began discussions to strengthen its next bi-monthly monetary policy, saying it could maintain interest rate stability but change its monetary policy stance amid rising inflation due to geopolitical developments.

The Monetary Policy Committee (MPC), headed by RBI Governor Shaktikant Das, is meeting for the first time in the current financial year. The meeting will run from 6 to 8 April and the results will be announced on 8 April.

In the last 10 meetings, the MPC has kept interest rates unchanged and maintained a tolerant monetary policy stance. The repo rate was last cut on May 22, 2020. Since then, the rate has remained at a historic low of 4 percent.

In a report this week, the State Bank of India (SBI) said that the central bank could significantly increase its inflation estimates for FY 2022-23 and lower its growth forecasts. It expects the RBI to continue with a break in the short-term lending rate (repo).

“Due to the long-term supportive position, a steady rise in inflation as well as a reduction in administered rates could create a signal loss and adjustment problem,” the SBI report said.

According to the report, the actual rates have been negative for an indefinite period of time and “the RBI may prefer to create a conflicting note by emphasizing inflation as a threat but at the same time insist on seizing it completely!”

“We do not expect any change in policy rates. The next step may be to change the liquidity situation which may change the operating rate. High inflation is mainly due to supply-side problems which cannot be resolved through high rates. I think we still have some time before we get there, “said Rajiv Shastri, Director and CEO, NJ Mutual Fund.

Pradeep Multani, president of the Industry Body PhD Chamber, said on Wednesday that the economy was still in the process of recovering from the devastating effects of the coronavirus epidemic and that a favorable policy position at this juncture would inevitably strengthen economic fundamentals.

“Although recent geopolitical developments have pushed up inflation, policy rate stabilization will help the economy cope with the impact of external shocks,” he said.

“Since the last policy, a hockeyist Fed and the war in Europe have significantly increased the risk of reversal of inflation. Refinancing above $ 100 will not only upset inflation expectations but also affect deficit estimates.” The MPC expects to maintain stability while correcting inflation expectations arising from a volatile global environment, raising commodity prices, and disrupting supply chains due to the war, “he said. , Fund Manager, Trust Mutual Fund.

The ongoing Russia-Ukraine conflict and rising oil prices are pushing up commodity prices, pushing up inflation.

The government has forced the central bank to keep inflation at 4 percent, with high and low tolerances of 2 percent.

Following the February MPC meeting, the RBI decided to keep its core debt rate at a record low for the 10th meeting to support the sustainable recovery of the economy.

With PTI input

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