RBI to begin three-day monetary policy meet today to decide on key rates

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is scheduled to announce its bi-monthly policy review on August 6 at the end of the three-day meeting held from August 4 to August 6.

Amid the raging coronavirus disease (Covid-19) pandemic in the country, the Reserve Bank of India (RBI) is all set to begin on Wednesday its three-day meet to decide key monetary policy rates. The central bank will announce its bi-monthly monetary policy review on Friday, at the end of the meeting, news agencies reported earlier this week, citing officials familiar with the matter.

A Reserve Bank of India (RBI) logo is seen at the entrance gate of its headquarters in Mumbai. (File Photo / REUTERS)

The Monetary Policy Committee (MPC) of the RBI is scheduled to announce its bi-monthly policy review on August 6 at the end of the three-day meeting held from August 4 to August 6. According to news agency PTI, the RBI is likely to maintain the status quo on interest rates and "watch the developing macroeconomic situation for some more time" before taking any decisive action(s) on monetary policy.

The MPC, a six-member team headed by RBI governor Shaktikanta Das, is in charge of deciding the key policy rates. The panel had left the rates unchanged last time, citing concerns about inflation.

Financial experts, cited by PTI, expect that the RBI will adopt a "wait-and-watch" strategy since it has little elbow room to maneuver about monetary policies in a world where higher commodity prices and rising global rates following the Covid-19 recovery leave serious implications on production costs.

The rising inflation in the Indian economy is because of the fuel prices, one of the experts said, adding that the pressure will ease out in a while after being normalised. It is expected thus that the central bank will keep the repo rate at the present level despite high inflation.

The Reserve Bank of India, which mainly factors in the retail inflation while arriving at its monetary policy, 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.

Inflation ruled above the tolerance band during June-November 2020 and has again moved above the upper tolerance threshold in May and June 2021. 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, a recent RBI article said.

(With inputs from PTI)