Central bank may keep the policy rate unchanged. In addition, market experts say the RBI is expected to revise its gross domestic product (GDP) figures as it expands its security acquisition program, or GSAP, announced in April.
The Reserve Bank of India’s (RBI’s) monetary policy committee is expected to maintain interest rates at its next review meeting on Friday for fear of inflation which adds to the impact of the second wave of Covid infections, according to a Mint study.
In addition, market experts say the RBI is expected to revise its gross domestic product (GDP) figures as it expands its security acquisition program, or GSAP, announced in April.
The RBI is likely to continue its monetary policy policy later this week, according to a number of bankers and economists surveyed by Mint. It will also be the first bi-financial fiscal policy by the year 2022, and the announcement will be made after a three-day meeting.
The MPC said that they do not see any change in the repo rate (next level) next week despite the fact that there is a high risk of rising import costs and falling prices. Emkay Global also said that the policy framework has become more effective and is based on government between new uncertainties and economic transformation.
Given the negative impact of the second wave of Covid, the majority of respondents did not agree that the RBI would lower its forecast for GDP growth by 1-1.5 percent from 10.5% of FY22.
The RBI can also keep a close eye on the risks of inflation. Rising input prices and supply disruptions due to the epidemic, especially in rural India, add to inflationary pressures. Rising global cost of commodities such as crude oil, crude oil, metals and transport has boosted domestic inflation.
Inflation (WPI) inflation affected 10.5% in April, while consumer inflation remained in the RBI range of 4.30%. The majority of elected economists expect the RBI to keep the inflation target at around 5.2%.
Aditi Nayar who is a chief economist at Icra said that they have estimate that the average inflation (CPI) to 5.2% in FY22 from 6.2% in FY21. However, it will remain above the revised MPC’s mid-range range of 2-6%, deciding that it is possible to reduce other measures to support economic and emotional activities.
The market is also looking forward to any announcement in GSAP 2.0 July-September. According to the original plan, the RBI to buy government security that could cost ₹ 1 lakh crore in the first quarter of FY22 to keep the yield curve at a comfortable level.
Economists expect the RBI to begin policy-making gradually from the fourth quarter.
Pranjul Bhandari of HSBC said that since 4Q2021, when the number of vaccinated people has reached critical levels, we expect the RBI to begin lowering the number of chemicals, raising the reverse repo rate, and changing its neutral position. Having said that, an increase of 4% could wait a long time in our view.