The three-day deliberation of the Reserve Bank's Monetary Policy Committee (MPC) began on Wednesday. After the presentation of the Union Budget 2021-22, this is the first monetary policy. The RBI will have to take necessary monetary action that will boost growth and keep other factors in control.
What is expected:
The six-member MPC headed by RBI Governor Shaktikanta Das is likely to hold the interest rates and continue with an accommodative policy stance. RBI's move will be in line with other key central banks like the US Fed, ECB, Bank of Japan that have continued with its accommodative monetary policy stance. They have kept their policy rates and liquidity support unchanged.
According to Care Ratings, RBI’s policy action will focus on balancing liquidity in the financial system while keeping inflation within its target.
Care Ratings expects retail inflation to move towards 5.5 per cent by March 2021.
The agency further stated that the growth projections from RBI will be closely monitored, as the Economic Survey has estimated nominal GDP growth of 15.4 per cent in FY22 and real GDP growth of 11 per cent.
For the last three monetary policies, the RBI kept the key benchmark rate unchanged. The current repo rate is at a record low of 4 per cent. The reverse repo rate is at 3.35 per cent.
RBI has cut policy rates by 115 basis points since February 2020.