Experts rule out any scope for rate reduction by apex bank
As per Arora, the upcoming MPC policy is unlikely to differ much from that in April 2023, hinging its reaction function to a fluid global situation and domestic growth-inflation backdrop, and retaining policy flexibility. “The policy tone will likely be balanced yet non-committal, with no change in the stance, thus adding to its inflation-fighting credibility,” she added.
Reserve Bank of India
CHENNAI: The RBI’s MPC may not remove its finger from the repo rate pause button it had hit in April 2023, said experts there by ruling out the possibility of a rate reduction.
“It is unlikely that the RBI will precede the Fed (US Federal Reserve) in reversing its course of rate hikes. However, MPC may soften its tone, on net amid (1) improving domestic inflation outlook (and a possible downward revision in its forecast), (2) improving external sector dynamics and (3) ongoing monetary-policy lags of past hikes,” Madhavi Arora, lead economist, Emkay Global Financial Services said.
As per Arora, the upcoming MPC policy is unlikely to differ much from that in April 2023, hinging its reaction function to a fluid global situation and domestic growth-inflation backdrop, and retaining policy flexibility. “The policy tone will likely be balanced yet non-committal, with no change in the stance, thus adding to its inflation-fighting credibility,” she added.
“The MPC will not change the repo rate. The inflation is less than five per cent and will be in the coming months,” said chief economist Madan Sabnavis, Bank of Baroda.
The consumer price index inflation moderated in April’23 to 4.70 per cent year-on-year and remained within the RBI’s target range (2-6 per cent) for the second consecutive month. Sabnavis also said the liquidity has increased and so the RBI-MPC’s stance will also not change.
On the other hand, the MPC may lower inflation forecast marginally, Sabnavis said.
Pointing out the fall in CPI and WPI inflation, Parijat Agrawal, Head-Fixed Income, union asset management company, said the drivers of inflation have softened and high interest rates and tighter financial conditions are working their way through economies. “We expect this trend to continue, falling close to the target 4 per cent in time.
“Accurately forecasting the potential impact of El Nino on the economy has become the primary concern. Considering our economy’s heavy dependence on farmers and small businesses, we feel the Centre would do well to take steps to mitigate the adverse effects of El Nino,” said Parag Sharma, whole-time director and CFO, Shriram Finance.
