MPC review: RBI may maintain status quo
On Dec 4, RBI Governor Shaktikanta Das will announce the apex bank’s status on the key rates. Analysts believe that the MPC may not do much on the non-interest rate tools, as significant measures (OMOs, TLTROs) have already been unleashed during the last policy meeting
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Apex bank may raise inflation and growth forecast
Mumbai: RBI is likely to maintain status quo in its bimonthly annual monetary policy review on December 4. Experts also hopeful that the RBI may raise its inflation and growth forecasts.
The bimonthly three-day review meeting of the monetary policy committee (MPC) of RBI kickstarted here on Wednesday. On conclusion of the meeting, the RBI governor, Shaktikanta Das will be declaring the apex bank's status on the key rates on December 4.
"With frequency indicators and GDP data conveying meaningful rebound in economic activity and retail inflation remaining stubbornly high, we not only expect the RBI to maintain status quo in Dec-20 policy meeting, but the minimal chance of a 25bps rate cut in Feb-21 also appears to be fading away. We also believe that the MPC may not do much on the non-interest rate tools, as significant measures (OMOs, TLTROs) have already been unleashed during the last policy meeting. The fact that liquidity remains high, while growth is gaining traction, makes us feel that RBI will adopt a wait-and-watch approach for next few months," said Amar Ambani, senior president & institutional research head at Yes Securities.
He further said RBI upgrade its growth outlook, wherein the Central bank will scale down on its earlier pessimistic GDP projection of 9.5 per cent for FY21.
Similarly, RBI will also update on the inflation trajectory, when compared with the earlier expectations of CPI moderating in Q4 FY21.
What should a central banker do when one is seeing rising yet likely-to-cool-off inflation? When you see a good Q2 GDP growth data, yet uncertainty exists with respect to coming quarters. When you need liquidity to provide credit to real sector yet grapple with not so high credit offtake. These could be the centre point for discussion ahead of the RBI monetary policy.
"We expect the RBI to be on hold yet another time – and suggest an extended pause as conflicting signals emerge from macro data points. Focus also could be on how much is the desired liquidity to ensure optimum balance between rates and monetary transmission," Lakshmi Iyer, president and chief investment officer (debt) & head products, Kotak Mahindra Asset Management Company said.
The upcoming RBI MPC policy will likely be a damp squib on conventional policy actions with inflation sticky at over 7 per cent in the near term.
