Regulation 

Industry and Government want RBI to cut rate.

Tomorrow is the day, when the fourth bi-monthly monetary policy statement for 2017 -18 will be released. All stake holders are keenly waiting for the day. Especially the industry, which has been demanding for lower interest rates are looking forward to hear from RBI.

The RBI governor Urjit Patel will be leading the Monetary Policy Committee today. It started two-day deliberations with industry and the government hoping for interest rate cut to spur growth which fell to 3-year low of 5.7 per cent in the June quarter. On the other hand, experts are expecting status quo.

Tomorrow is the day, when the fourth bi-monthly monetary policy statement for 2017 -18 will be released. All stake holders are keenly waiting for the day. Especially the industry, which has been demanding for lower interest rates are looking forward to hear from RBI.

However, the Bankers are expecting that the Reserve Bank of India would maintain status quo as inflation has taken place.

The RBI is likely to maintain status quo on key lending rate in tomorrow’s policy review as it is “stuck in a conundrum” of low growth, mild inflation and global uncertainties, according to the SBI report.

The experts found that against the background of flexible inflation targeting, the obvious question that arises is choosing between moving towards the 4 per cent inflation target swiftly or just staying within the inflation band of plus/minus 2 per cent.

Morgan Stanley said in the research note that he expects the RBI to stay on hold at the upcoming meeting as rising incoming inflation and projections of further acceleration in inflation ahead will mean that there would be limited space for further easing.

But some of the finance ministry official says there is scope for an RBI rate cut at the next policy review as retail inflation continues to be low. Some experts find that there is scope for monetary easing because of inflation projections, and they added that all the government analysis is made on the basis of inflation remaining under 4 per cent in the medium term.

As per the reports, Assocham wrote to the MPC to cut the interest rates at least by 25 basis points, given the challenges being faced by the economy which needs immediate measures for revival of growth. So at least 50 basis points elbow room can be taken with regard to 3.2 per cent fiscal deficit for the current year and the next financial year. The RBI reduced the repo rate by 0.25 per cent to 6 per cent, citing reduction in inflation risks. The rate cut was the first in 10 months and brought policy rates to a near 7-year low.

 

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