RBI rate-setting panel brainstorming for next round of monetary policy

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RBI rate-setting panel brainstorming for next round of monetary policy

The Reserve Bank's rate-setting panel started brainstorming on Monday for the next round of monetary policy, despite expectations of a moderate interest rate hike of 25 -- 35 basis points as inflation started showing signs of easing and economic growth tapering.

The RBI has hiked key benchmark lending rate by 50 basis points bps thrice since June, above an off-cycle 40 bps increase in repo in May.

The RBI Governor Shaktikanta Das will be announcing the bi-monthly monetary policy on Wednesday December 7 at the end of the three-day MPC meeting.

In a research report by Group Chief Economic Advisor Soumya Kanti Ghosh, India's largest lender State Bank of India said: "We expect the RBI to hike rates in smaller magnitude in December policy attuned to emerging market central banks and the overall rate setting tone. A 35 bps repo rate hike looks imminent. We believe that at 6.25 per cent, it could be the terminal rate for now. The current policy repo rate is 5.9 per cent.

There are several experts who believe that the rate hike will be in the range of 25 -- 35 basis points on Wednesday.

The RBI had hiked key policy rate repo by 50 basis points on September 30, with an aim to check inflation.

It was the third successive hike of 50 bps. The repo rate was raised by 50 bps each in June and August and 40 bps in May before the September hike.

Consumer price index CPI based retail inflation, which the RBI mainly factors in while arriving at its monetary policy, is showing signs of moderatertaion, but is still above the central bank's upper tolerance level of 6 per cent since January this year.

In October, inflation fell to 6.77 per cent from 7.41 per cent in the previous month, mainly due to easing prices in the food basket, but it was above Reserve Bank's comfort level for the 10th month in a row.

In the second quarter of the fiscal year, the GDP growth slowed to 6.3 per cent, compared to the previous three months' growth of 13.5 per cent.

The RBI has been tasked with keeping the retail inflation at 4 per cent with a margin of 2 per cent. It failed to keep the inflation rate below six per cent for three consecutive quarters beginning January 2022, which was a result of the government's failure to keep the inflation rate below six per cent. It had to submit a report to the government detailing the failure to contain prices and remedial steps to rein in the price rise.