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Rate cut or status quo? RBI begins 2-day policy review

RBI's Urjit Patel starts 2-day policy review; Industry, govt hope for rate cut to spur growth

Press Trust of India  |  Mumbai 

RBI, reserve bank of India
Reserve Bank of India

The Monetary Policy Committee headed by governor Urjit Patel started two-day deliberations today with industry and the government hoping for cut to spur growth which fell to 3-year low of 5.7 per cent in the June quarter, while experts expect status quo.

The fourth bi-monthly monetary policy statement for 2017 -18, to be released tomorrow, is being keenly awaited by all stakeholders -- especially the industry which has been demanding for lower interest rates.


Bankers however are of the view that the (RBI) would maintain status quo as has risen.

According to a report, the is likely to maintain status quo on key lending rate in tomorrow's policy review as it is "stuck in a conundrum" of low growth, mild and global uncertainties.

It said that against the background of flexible targeting, the obvious question that arises is choosing between moving towards the 4 per cent target swiftly or just staying within the band of plus/minus 2 per cent.

"We expect the to stay on hold at the upcoming meeting as rising incoming and projections of further acceleration in ahead will mean that there would be limited space for further easing," Morgan Stanley said in the research note.

On the other hand, a top finance ministry official said last week that there is scope for an rate cut at the next policy review as retail continues to be low.

"There is scope for monetary easing because of projections," the official had said, adding that all the government analysis is made on the basis of remaining under 4 per cent in the medium term.

Industry body Assocham has written to the MPC to cut the interest rates at least by 25 basis points, given the challenges being faced by the economy which needs immediate measures for revival of growth.

"At least 50 basis points elbow room can be taken with regard to 3.2 per cent fiscal deficit for the current year and the next financial year," it said.

In its last policy review in August, the reduced the repo rate by 0.25 per cent to 6 per cent, citing reduction in risks.

The rate cut was the first in 10 months and brought policy rates to a near 7-year low.

However, retail rose to a five-month high of 3.36 per cent in August due to costlier vegetables and fruits.

The consumer price index (CPI) based was 2.36 per cent in July.

Other members of the MPC are Deputy Governor in-charge of monetary policy Viral A Acharya and Executive Director Michael D Patra.

Indian Statistical Institute professor Chetan Ghate; Delhi School of Economics Director Pami Dua and IIM-Ahmedabad professor Ravindra H Dholakia are the government nominees of the MPC.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, October 03 2017. 14:47 IST
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