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
  • Air India sets new world record with all-women crew

    2017/03/11 In a quest to set a new world record, Air India has operated a flight around the world with an all-women crew ahead of International Women’s Day. The flight, which departed from here on February 27 for San Francisco, returned at the Indira Gandhi International airport next flying across the globe. The aircraft, a Boeing 777-200LR, flew over the Pacific last week on its journey to San Francisco, while the return flight flew over the Atlantic, encircling the globe, Air India said.
  • Higher earning Why a university degree is worth more in some countries than others

    2016/12/11 A university education may expand your mind. It will as well fatten your wallet. Data from the OECD, a club of rich nations, show that graduates can expect far better lifetime earnings than those without a degree. The size of this premium varies. It is greatest in Ireland, which has a high GDP per chief and rising inequality. Since 2000 the unemployment rate for under-35s has swelled to 8% for those with degrees – but to additional than 20% for those without, and nearly 40% for secondary school drop-outs. The country’s wealth presently goes disproportionately to workers with letters next their names.
  • What India’s elite and global policymakers really think about demonetisation

    2016/11/28 The jury is still out nearly three weeks next the Narendra Modi government’s amaze decision to demonetise the Rs500 and Rs1,000 denomination notes. The move has polarised some of the sharpest minds in the country, and elsewhere. There are some who have come out in support, others have either criticised its execution or said that the painful exercise won’t help curb black money or unaccounted wealth.
  • Demonetisation has Left India’s Food Markets Frozen – and the Future Looks Tense

    2016/11/23 As demonetisation enters its second week, traders in Patna’s Maroofganj mandi are seeing something unprecedented. In the last seven days, the supply of new stocks in this wholesale market, which supplies cooking oil, spices, rice, wheat and pulses to shopkeepers across Patna, has plummeted. The supply of cooking oil, for instance, is down by 80%. Talk to traders selling spices, grains or pulses and you hear similar numbers. “Do you see how quiet this market is?” said an accountant at a rice shop. “Till 10 days ago, you would not have been able to walk down this street.” In the same period, orders from shopkeepers have fallen steeply as well. Most of them cannot buy as much stock as before, said Abhijit Kumar, who runs a wholesale shop for spices, because they have only Rs 500 and Rs 1,000 notes – both derecognised as legal tender by the government.
  • Demonetization in India Has Paralyzed Retail Trade and the Informal Economy

    2016/11/23 The National Hawker Federation (NHF) expresses its strong disagreement with the ways in which the Government of India has addressed the evil of corruption in the country. While we do feel as a collective of additional than 1176 unions and associations of street vendors of this country, that black money and the corruption raj should end and policy of law be established, we strongly believe that struggle against corruption cannot be waged devoid of a strong social will, a long-term schedule, an alternative infrastructural vision, and popular consent.