Three-day monetary policy meet begins

The MPC is mandated to administer inflation targeting monetary policy regime through the policy interest rates. (File photo)

The Monetary Policy Committee (MPC) began its three-day meeting on Wednesday to decide its policy stance amid an unrest in stock, bond and money markets.

The committee may have to look into ways to clam the situation and bring back stability, something which does not really fall in its realm.

The MPC is mandated to administer inflation targeting monetary policy regime through the policy interest rates.

However, in the wake of the current crisis in Infrastructure Leasing and Financial Services Ltd (IL&FS) and a fear of its contagion has led to heightened expectations among market players about a word from RBI Governor Urjit Patel when he announces the MPC decision on Friday.

The Centre has acted swiftly to contain the crisis by taking over the infrastructure behemoth and also ordering a probe into it. But the investors were seen trading cautiously on Wednesday ahead of the RBI policy review.

On Wednesday, the rupee fell to a new low and crashed below the 73-mark against the dollar for the first time and impacted by a weak rupee, the benchmark indices traded lower in the afternoon.

Market expectations from the RBI have also increased in the wake of Finance Minister Arun Jaitley assuring that the government and the central bank and other regulators were watching the situation armed with measures.

Inflation, the prime mandate of MPC, is under control at present. Nevertheless, the country is at the risk of importing inflation from higher crude oil prices and depreciating rupee. India is a net importer of crude oil and gets about 80% of its domestic consumption from the overseas market.

The RBI has given two back-to-back rate hikes in its June and August policies lifting the policy repo rate at 6.5%.

On Friday, too, it is widely expected to raise the repo rate in a bid to slow the rupee fall and rein in inflationary expectations.

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Three-day monetary policy meet begins

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