New Delhi: The Reserve Bank is likely to keep the key rate unchanged on Wednesday and stay focused on inflation control as the rebound in September quarter GDP growth – after a five quarter decline – seemed to have eased pressure on it to lower rates, experts said.
India Inc, however, is demanding interest rate cut to further build on positive sentiment generated by the rebound and upgrade of the country’s sovereign rating by Moody’s.
The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, will meet on December 5 and 6 for the Fifth Bi-monthly Monetary Policy Statement for 2017-18. The resolution of the MPC will be made public on December 6.
In its October review, it had kept the benchmark interest rate unchanged on fears of rising inflation while lowering growth forecast to 6.7 percent for the current fiscal.
The central bank had reduced the benchmark lending rate by 0.25 percentage points to 6 percent in August, bringing it to a 6-year low.
Bankers and experts are of the view that the RBI for the second time in a row may key repo-rate or short term lending rate unchanged as inflation trajectory is likely to remain upward in the coming months.
“It’s going to be a status quo. The liquidity in the system is very low, deposit rates are firming up and there are concerns about inflation,” said Union Bank MD and CEO Rajkiran Rai G.
Global financial services major Nomura said while lower GST rates have moderated output prices, input cost pressures are marginally higher, which along with higher food inflation is likely to push retail inflation slightly above the RBI midpoint target of 4 percent in November and beyond.
“We expect a hawkish hold from the RBI..And policy rates to remain unchanged through 2018,” it said in a report.