The Reserve Bank of India (RBI) will announce its bi-monthly monetary policy on Friday and the central bank is expected to opt for the status quo on interest rates amid inflationary concerns. Financial experts, cited by PTI, expect that RBI will adopt a "wait-and-watch" strategy since it has little elbow room to manoeuvre monetary policies as higher commodity prices and rising global rates following the Covid-19 recovery leave serious implications on production costs.
"Higher commodity prices and rising global prices post the robust recovery in a few industrial countries will have implications on production costs," Rumki Majumdar, an economist with Deloitte India, was quoted as saying by PTI.
RBI governor Shaktikanta Das-led Monetary Policy Committee's (MPC) review meeting started on Wednesday.
"We expect the RBI MPC to look through the transitory hump in inflation and stick with a unanimous dovish pause in the upcoming August 6 policy. The MPC is likely to revise up its FY22 average CPI inflation forecast slightly from the previous 5.1 per cent and flag potential upside risks," according to a BofA Global Research report quoted by PTI.
A recent RBI article said that the central bank has been mandated by the government to keep Consumer Price Index (CPI) based inflation at 4 per cent with a margin of 2 per cent on either side.
The sense is that inflation will persist at these elevated levels for some months before easing in the third quarter of 2021-22 when the kharif harvest arrives in markets, according to PTI.
{{/usCountry}}The sense is that inflation will persist at these elevated levels for some months before easing in the third quarter of 2021-22 when the kharif harvest arrives in markets, according to PTI.
{{/usCountry}}After the June MPC meet, RBI left the benchmark interest rate unchanged at 4 per cent. It was for the sixth time in a row that MPC maintained the status quo on the interest rate.