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RBI’s MPC may not change August policy rate: DBS

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has left the policy rate unchanged in August and will maintain the repo rate at 4% at the next meeting of the Singapore-based financial services group DBS. I think it is likely to be done. RBI MPC will be held from Wednesday, August 4th to Friday, August 6th.

Central bank forward guidance will support the continuation of an accommodative policy stance to protect against growth risks, especially the third COVID-19 wave. In a memo dated July 30, DBS Senior Economist Radikarao said the RBI will consider inflation risk through close scrutiny and refrain from adjusting policy levers.

‚ÄúPrefering to elicit excess liquidity over time could increase the size of variable repo rate auctions, reaffirming support for the ongoing G_SAP program. Repo Trading)-Bank Liquidity Government Cash balance. “

Anyway, it supports RBI’s intention to clear liquidity at a coordinated pace before preparing for rising reverse repo rates and changing policy stances either at the end of 2021 or at the beginning of 2022.

Rao said global factors could be mentioned, but said they were unlikely to trigger domestic price behavior. She noted at a recent Federal Open Market Committee (FOMC) comment by US Federal Reserve Board Chairman Jerome Powell on reducing bond purchases.

Since the last rate hike review in June, Mr. Lao said, “Policymakers have given two months of inflation indicators and a number of high-frequency indicators that show that the economy has recovered significantly from the second wave of economic downturn. I have it. ” Pandemic. “The latest monthly RBI report reflects this confidence, but it also raises some warning signs, she added.

According to the note, rapid deployment of vaccination, recovery of activity indicators, and strong agricultural productivity (depending on weather conditions) are several reasons to remain hopeful.

Nonetheless, slow improvements in aggregate demand, a snail-paced resumption of the service sector, and the risk of the third COVID-19 wave eased optimism about economic recovery.

“Note the tone of inflation after CPI inflation remained strong at 6.3% year-on-year for the two months of June. Despite these rising prints, RBI Governor Das recently said that inflation has risen. He emphasized that it is still largely supply-driven and what we call temporary. We hope that the hump will ease by the second half of 2021, “Lao said.

Edited by Mehak Agarwal

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RBI’s MPC may not change August policy rate: DBS

Source link RBI’s MPC may not change August policy rate: DBS

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