RBI's monetary policy announcement: What is expected?
RBI's monetary policy announcement: What is expected?

RBI Governor Shaktikanta Das-headed rate-setting panel monetary policy committee (MPC) started its three-day deliberation on the monetary policy on April 5. This policy will be announced amid a sudden surge in COVID-19 cases and the government's recent mandate asking the central bank to keep retail inflation around 4 per cent.

Today, RBI governor Das will announce the decision of the MPC on the rate cut if there is any. The policy repo rate or the short-term lending rate is currently at 4 per cent, and the reverse repo rate is 3.35 per cent.

What is expected:

- Experts are of the view that the RBI will maintain the status quo on policy rates at its first bi-monthly monetary policy review for the current fiscal.

- It is also likely to maintain an accommodative policy stance.

- Last month, the government had asked the Reserve Bank to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side for another five-year period ending March 2026. Thus, some experts feel that RBI MPC may adopt a cautious approach and hold the repo rate at 4 per cent.

- In the current scenario, the RBI may like to drain in excess liquidity. Hence, the RBI may go slow in reversing its liquidity measures announced as a COVID stimulus since March 2020.

- The central bank mainly factors in the retail inflation based on Consumer Price Index while arriving at its monetary policy. On February 5, after the last MPC meeting, the central bank had kept the key interest rate (repo) unchanged citing inflationary concerns.

(Input from agencies)

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