Asia > Southern Asia > India > Bankers expect the RBI to maintain status quo on rates at the monetary policy

India: Bankers expect the RBI to maintain status quo on rates at the monetary policy

2014/05/29

Bankers expect the Reserve Bank of India (RBI) to maintain status quo on rates at the monetary policy review on Tuesday as retail inflation is yet to show signs of slowing down. The RBI has been tracking consumer price inflation closely and, according to the report of a committee headed by deputy governor Urjit Patel, it is targeting to bring consumer price index (CPI) inflation down to 8% by the end of January 2015 and 6% by January 2016.

Bankers point out that since the CPI hit a three-month high in April, RBI is likely to keep policy rates on hold. “Except for the sentiment, nothing has changed yet and, so, we think RBI will not opt for changes in policy rates,” said RK Dubey, chairman & managing director, Canara Bank.

Retail inflation hit a high of 11.16% in November last year and stood at 8.59% in April, driven by higher food prices.

“The market is not expecting any change in policy rates and the April CPI data is the main reason,” said Arun Kaul, chairman & managing director, UCO Bank.

In the April policy, RBI had said that

there are risks to the central forecast of

8% CPI inflation by January 2015 due to a less-than-normal monsoon.

“The Reserve Bank of India has reiterated that inflation control was a priority and the bank will also attempt to balance growth-inflation objectives. We look for the repo to be left unchanged next week,” DBS Bank India said in a note. RBI governor Raghuram Rajan has raised the key repo rate thrice since taking over the reins of the apex bank in September, 2013. In January, the repo rate hike was seen as a surprise move as the market was expecting a pause.

“We note that the RBI is unlikely to cut policy rates in FY 2015, given high CPI inflation through FY15,” a recent report by Kotak Institutional Securities said. However, in April, RBI had kept the rates on hold and indicated that RBI will keep rates steady in the near term if inflation eases towards its targeted level. “I do not expect change in rates from RBI as inflation is still not at its comfort level,” said MS Raghavan, chairman & managing director, IDBI Bank.

Foreign brokerage Barclays expects that going forward inflation could moderate, which should lead to easing of interest rate by the central bank. “With favourable government policies, we expect an improvement in sentiment that could lead to the beginning of the next growth cycle in India,” Barclays said in a note last week.

Related Articles
  • Narendra Modi meets President of Israel

    2015/03/30 Prime Minister Narendra Modi today met Israel President Reuven Rivlin and discussed the bilateral relations and the ways to take it forward. Modi, who arrived here this morning to attend the National funeral services of Lee who died at the age of 91, had a short conference with President Rivlin who reiterated an invitation to the Prime Minister to visit Israel. There is an invitation from Israeli Prime Minister Benjamin Netanyahu for Modi to visit Israel.
  • India, Kazakhstan negotiating to invest in Iran’s steel sector

    2015/03/30 India and Kazakhstan are negotiating with Iran to invest in the country’s steel sector. “We have announced readiness to accept Indian investment in the steel sector and they are planned to start activity in the country,” Iran’s ISNA news agency quoted Iran’s deputy industry minister Mehdi Karbasian as saying on March 24. “We are as well negotiating with Kazakh companies to invest in our steel, zinc, and aluminum projects,” he added. A large number of representatives of foreign mining companies have visited Iran over the completed year and have announced readiness to invest in Iran, he said.
  • Rwanda: India Imparts Skills to Local Manufacturers

    2015/01/30 Rwandans will be able to acquire various manufacturing skills from the India-Africa Vocational Training and Incubation Centre launched yesterday in Nyarutarama, Gasabo District, Kigali. The centre will provide training to bridge the skills gaps and reduce unemployment. It consists of eleven fields: bakery, tomato ketchup and fruit juice making, edible oil extraction, packaging, soya milk extraction. Others are automatic wire nail manufacturing, paper napkin and toilet roll manufacturing, knitting, stitching and embroidery, cell phone repair, potato chips manufacturing, popcorn making, ice cream cone making, fashion design, and crockery, part others.
  • Revised IMF forecasts signal gloom on global economic outlook

    2015/01/20 Low oil prices will not provide a sufficient updraught to dispel the clouds hanging over the world economy, the International Monetary Fund said on Tuesday. In a sign of its increasing gloom about the medium term economic outlook, the IMF cut its world economic increase forecasts by 0.3 % points for both 2015 and 2016, despite believing cheaper oil represents a “shot in the arm”.
  • Oxfam Study Finds Richest 1% Is Likely to Control Half of Global Wealth by 2016

    2015/01/20 The richest 1 % are likely to control additional than half of the globe’s total wealth by next year, the charity Oxfam reported in a study released on Monday. The warning about deepening world inequality comes just as the world’s business elite prepare to meet this week at the annual World Economic Forum in Davos, Switzerland. The 80 wealthiest people in the world all own $1.9 trillion, the statement found, nearly the same all shared by the 3.5 billion people who occupy the bottom half of the world’s gain scale. (Last year, it took 85 billionaires to equal that figure.) And the richest 1 % of the people, who number in the millions, control nearly half of the world’s total wealth, a share that is as well increasing.