<p>With the appointment of three new members on the Monetary Policy Committee (MPC), the RBI is now set to announce its next policy decision on Friday. But wary of high inflation and higher inflationary expectations of the households, it may choose not to cut the key interest (repo) rate this time around.</p>.<p>Normally, an interest rate cut would have meant cheaper finance to households and industry if commercial banks immediately pass on the benefits by reducing their lending rates.</p>.<p>But consumer price inflation, which the RBI tracks for its interest rate decisions, has been above the central bank’s medium-term target of 4% for the past one year. Economists believe that may tie its hands even though the economy is on the decline.</p>.<p>"There is likely to be no change in the repo and reverse repo rates with RBI keeping a close eye on key macroeconomic data. The stance will continue to be accommodative and supportive of economic growth," Shanti Ekambaram, Group President – Consumer Banking, Kotak Mahindra Bank, said. She added that high-frequency data shows that many segments of the economy are moving and are reaching close to 70-80% of pre-Covid levels. "Inflation is still elevated. However, with normal monsoons and higher agriculture output, inflation should moderate through October-December. Overall, expect a 'wait and watch' policy,” she said.</p>.<p>The government has appointed eminent economists Ashima Goyal, Jayanth R Varma and Shashanka Bhide as members of the MPC for four years till 2024 as members of the rate-setting MPC. It was due to their delayed appointment that the RBI had to defer its monetary policy on October 1.</p>.<p>However, the change in the structure of the MPC is unlikely to change the central bank’s outlook.</p>.<p>However, the RBI, will give a guidance of inflation and economic growth in its monetary policy on Friday. It had given its last forecast on the economy in February but the RBI Act requires it to publish its forecasts every six months.</p>.<p>In its February forecast, the RBI had raised its economic growth projections to 6% for the current financial year (2020-21). However, in the midst of the pandemic, Goverrnor Shaktikanta Das had said the economic growth will be negative in the current year but there was no official forecast.</p>.<p>RBI has reduced the repo rate by 115 bps in 2020 on the back of 135 bps of rate cuts in 2019 and has maintained an accommodative stance despite the worryingly high inflation levels due to a near-collapse of the economy.</p>
<p>With the appointment of three new members on the Monetary Policy Committee (MPC), the RBI is now set to announce its next policy decision on Friday. But wary of high inflation and higher inflationary expectations of the households, it may choose not to cut the key interest (repo) rate this time around.</p>.<p>Normally, an interest rate cut would have meant cheaper finance to households and industry if commercial banks immediately pass on the benefits by reducing their lending rates.</p>.<p>But consumer price inflation, which the RBI tracks for its interest rate decisions, has been above the central bank’s medium-term target of 4% for the past one year. Economists believe that may tie its hands even though the economy is on the decline.</p>.<p>"There is likely to be no change in the repo and reverse repo rates with RBI keeping a close eye on key macroeconomic data. The stance will continue to be accommodative and supportive of economic growth," Shanti Ekambaram, Group President – Consumer Banking, Kotak Mahindra Bank, said. She added that high-frequency data shows that many segments of the economy are moving and are reaching close to 70-80% of pre-Covid levels. "Inflation is still elevated. However, with normal monsoons and higher agriculture output, inflation should moderate through October-December. Overall, expect a 'wait and watch' policy,” she said.</p>.<p>The government has appointed eminent economists Ashima Goyal, Jayanth R Varma and Shashanka Bhide as members of the MPC for four years till 2024 as members of the rate-setting MPC. It was due to their delayed appointment that the RBI had to defer its monetary policy on October 1.</p>.<p>However, the change in the structure of the MPC is unlikely to change the central bank’s outlook.</p>.<p>However, the RBI, will give a guidance of inflation and economic growth in its monetary policy on Friday. It had given its last forecast on the economy in February but the RBI Act requires it to publish its forecasts every six months.</p>.<p>In its February forecast, the RBI had raised its economic growth projections to 6% for the current financial year (2020-21). However, in the midst of the pandemic, Goverrnor Shaktikanta Das had said the economic growth will be negative in the current year but there was no official forecast.</p>.<p>RBI has reduced the repo rate by 115 bps in 2020 on the back of 135 bps of rate cuts in 2019 and has maintained an accommodative stance despite the worryingly high inflation levels due to a near-collapse of the economy.</p>
