Rate cut or status quo? RBI policy meet begins; decision on rate tomorrow

RBI Governor Urjit Patel headed Monetary Policy Committee started two-day deliberations on Tuesday amid several experts saying that the central bank is unlikely to lower the key interest rate and will stay focused on controlling inflation.

The MPC meeting outcome tomorrow is being keenly awaited by all stakeholders including the industry and stock markets.

In its October review, the MPC had kept the benchmark interest rate unchanged on fears of rising inflation while lowering growth forecast to 6.7 per cent for the current fiscal.

The Reserve Bank of India had reduced the benchmark lending rate by 0.25 percentage points to 6 per cent in August, bringing it to a 6-year low.

Bankers and experts are of the view that for the second time in a row it may keep the repo-rate or short term lending rate unchanged as inflation trajectory is likely to remain upward in the coming months.

"It's going to be a status quo. The liquidity in the system is very low, deposit rates are firming up and there are concerns about inflation," Union Bank MD and CEO Rajkiran Rai G has said.

Credit rating firm ICRA has also said that RBI is likely to keep the key policy rate unchanged at 6 per cent as it expects retail inflation to firm up in the coming months.

The meeting is taking place at a time when the wholesale prices based inflation in October shot up to a 6-month high of 3.59 per cent. The retail inflation (Consumer Price Index) for October rose to a 7-month high of 3.58 per cent.

That apart, reversing a five-quarter slide, the Indian economy bounced back from a three-year low with the GDP expanding by 6.3 per cent in the July-September period as manufacturing revved up and businesses adjusted to the new GST tax regime.

The GDP growth in the second quarter of 2017-18 was higher than 5.7 per cent in the preceding April-June period.