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
  • 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.
  • India: The way to a tourist’s heart is through their stomach

    2016/11/11 Anil Bhandari, well-known industry professional, has said that the India Ministry of Tourism should promote the country as a cuisine destination of the world. Authentic recipe books should be made and as well gifted from the tourist offices and embassies. Bhandari was speaking at the 13th Chefs Day event in Delhi at The Ashok Hotel. He said cuisine tours to India must be promoted.
  • Nigeria Reaffirms Trade Commitment to India with $15B Oil Deal

    2016/11/04 Nigerian authorities have announced plans to sign a transaction worth $15 billion as an advance crude oil payment from the government of India.. Ibe Kachikwu, Nigeria’s junior minister for Petroleum Resources, says the $15 billion in advance oil payments will provide some respite for Nigeria’s current cash flow problems. According to theCable, the transaction will see the Indian government make an upfront payment for the purchase of Nigerian crude, which would be repaid on the basis of firm term crude contracts over a couple of years.