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RBI may opt for status quo on rates
RBI Governor Urjit Patel- led Monetary Policy Committee (MPC) on Tuesday began its bi-monthly interest rate review, which is scheduled on Wednesday, amid the government pitching for a reduction in borrowing cost to help push private investments. Most analysts, however, expect no change in interest rates in view of more than $60 billion of excess liquidity in the system.
New Delhi : RBI Governor Urjit Patel- led Monetary Policy Committee (MPC) on Tuesday began its bi-monthly interest rate review, which is scheduled on Wednesday, amid the government pitching for a reduction in borrowing cost to help push private investments. Most analysts, however, expect no change in interest rates in view of more than $60 billion of excess liquidity in the system.
Those seeking a cut in interest rates cite consumer price inflation slowing down to 2.99 per cent in April, economic growth during the last fiscal at its slowest pace in two years and weakest loan demand since at least 1992. “I don’t think the RBI will cut repo rate in the upcoming policy. They will wait for CPI data before taking a call. The tone of the policy is likely to be dovish,” Union Bank of India executive director Vinod Kathuria said.
“Given the inflation trajectory and as the liquidity is enough in the market, it is unlikely that there would be any rate cut this time. I think commentary of the policy will be benign,” State Bank of India DMD and Chief Financial Officer Anshula Kant said.
However, experts also feel that RBI will likely strike a less hawkish tone. “The RBI is unlikely to cut rates in its upcoming policy review but the tone of the statement will be less hawkish than the previous one,” rating agency ICRA said.
Finance Minister Arun Jaitley on Monday made a case for cut in interest rates, saying inflation has been under control for long and is likely to remain so on the back of good monsoon while there is no likelihood of a spike in oil prices. “Growth and investment need to improve. These are indicators which are available. Any finance minister under these circumstances would like a rate cut, the private sector would like a rate cut.
