Connect with us

Business News

Will RBI maintain status quo again?

Published

on


In August, the RBI had kept the repo rate unchanged at 4 per cent and the reverse repo rate at 3.35 per cent.

The Monetary Policy Committee (MPC) headed by Reserve Bank Governor Shaktikanta Das will announce its policy decision at the end of the three-day bi-monthly review meeting tomorrow i.e. on October 8. The Monetary Policy Committee is widely expected to maintain status quo on the repo rate to support growth, but some analysts see a slim chance of a nominal hike in the reverse repo rate.

Market participants will keep an eye on the Reserve Bank’s guidance on liquidity withdrawal, given that surplus cash in the banking system recently topped Rs 10 trillion. Many also expect the banking regulator to announce additional bond purchases; RBI has already bought bonds worth Rs 2.05 trillion in this financial year as part of the government’s securities acquisition programme.

All 60 forecasters in a Reuters poll saw no prospect of a change in the repo rate in the upcoming policy. They expect the RBI to raise the repo rate only in April-June 2022, although the price pressure has increased due to rising fuel prices.

In its last bi-monthly Monetary Policy Committee (MPC) review meeting held in August, the Reserve Bank maintained status quo on key interest rates for the seventh time in a row and retained the GDP growth target at 9.5 per cent. It kept the repo rate unchanged at 4 per cent and the reverse repo rate at 3.35 per cent.

RBI has maintained the repo rate at a record low of 4 per cent since May 2020, after cutting it by 115 basis points (bps) in early 2020. It had last cut policy rates on May 22, 2020, in an off-policy cycle. To protect the economy from the shock of the coronavirus.

RBI Governor Shaktikanta Das on Wednesday said India should seek sustainable growth through medium-term investments and strong financial and structural reforms after the global pandemic ends.

Meanwhile, India’s services industry expanded for the second consecutive month in September, with improving domestic demand and easing of Covid-19 restrictions, prompting companies to hire more employees for the first time in nearly a year. The IHS Market Services Purchasing Managers’ Index fell from an 18-month high of 56.7 in August to 55.2 in September, but remained comfortably above the 50-mark, separating growth from contraction.

And Moody’s has upgraded India’s rating outlook to “stable” from its earlier “negative” outlook. The global rating agency said the economic recovery is in progress as activity is gradually picking up and spreading across sectors. Moody’s downgraded India’s rating from Baa2 to Baa3 last year, noting that it could face difficulties in implementing policies to mitigate the risks of a sustained period of low growth.

.

Copyright Indian Lekhak Limited 2021. All Rights Reserved