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RBI likely to adopt wait-and-watch approach on Tuesday

August retail inflation eased to a five-month low of 5.05% but WPI inflation climbed to a two-year high of 3.74%

Press Trust of India  |  Mumbai 

Urjit Patel
Urjit Patel

The newly-constituted Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel is unlikely to lower rates at its maiden policy review on Tuesday as it awaits more supporting data on inflation, experts said.

The monetary policy review on October 4 will be the first by the six-member MPC as well as Governor Patel, who as the deputy governor had described the RBI as an owl when it comes to inflation management.

"I don't think the Reserve Bank is going to change rates as inflation — both WPI and CPI — have not softened much," Bank of Maharashtra Managing Director and Chief Executive R P Marathe told PTI.

August retail inflation eased to a five-month low of 5.05 per cent but WPI inflation climbed to a two-year high of 3.74 per cent.

Before the dip in August, both the retail as well as wholesale price indices were on a continuous upward spiral.

The government had in August notified 4 per cent inflation target with a range of plus/minus 2 per cent for the next five years under the monetary policy framework agreement with the Reserve Bank.

Patel was the one who wrote the inflation glide path for RBI when he was deputy to former Governor Rajan, and analysts say it is unlikely that he will jettison his guard on price rise, especially under the new inflation targeting framework.

"RBI is unlikely to cut rate this time," Union Bank of India Chairman and Managing Director Arun Tiwari said.

On his policy expectations from the new Governor, he said Patel may announce "some more measures related to resolution of non-performing assets".

First Published: Sun, October 02 2016. 12:13 IST