RBI to keep policy rates on hold

RBI to keep policy rates on hold

BE/RBI  NOTE/11/2018

There is news that RBI, the apex bank may  keep policy rates on hold and maintain its neutral stance at the ensuing policy review meet early next month.  According to the global financial services major, though the country’s economic growth is on an uptrend, recovery remains in an early stage, and this warrants a neutral stance.

Considering the growth and inflation backdrop relative to the Monetary Policy Committee (MPC’s) assessment, Morgan Stanley expects the MPC to remain on hold and maintain its neutral stance.  The central bank’s next monetary policy review is scheduled for April 5. It had kept the policy rate unchanged in its February meeting on fears of inflation.

The Headline CPI inflation print for January-February maintained an average of 4.8 per cent, which is bit weaker than the RBI’s projection of 5.1 per cent for the March quarter this year.  On the growth front, the release of the GDP statistics for the December 2017 quarter indicate that there is a steady recovery path in the economy.  Kudos to the impact of the currency replacement programme and GST implementation decline.

Also the report adds that  with no fresh new concerns over the inflation dynamic and with the recovery remaining in a nascent stage,  hopes of MPC’s finding merit in not taking up rate hikes at the upcoming meeting, is more.

The report further noted that RBI can move to commence a shallow rate hike cycle by the fourth quarter of this year, as inflation is not expected to overshoot the RBI’s target  and possibly the growth path of the country will be in a good position.

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