RBI to announce monetary policy review on Tuesday - Firstpost
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RBI to announce monetary policy review on Tuesday

Updated: Jan 29, 2016 19:50 IST

#CRR   #Interest rate   #Monetary policy   #Raghuram Rajan   #RBI   #RBI Governor   #Repo  

Mumbai: Reserve Bank will announce its sixth Bimonthly Monetary Policy Review on February 2, the last before presentation of the Union Budget amid clamour for rate cut to give a boost to the economy.

BofA Merrill Lynch Global Research said it "continue to expect" the RBI to cut the key policy rate by 25 basis points in the February policy review.



"We continue to expect a final 25 bps RBI repo rate cut on February 2. That said, the RBI is approaching the end of its rate cutting cycle. The repo rate, at 6.5 per cent then, would be well below the average CPI inflation rate of 7 per cent (using it as proxy for inflation expectations)," it said.
The RBI will announce the Monetary Policy Review on February 2 by way of a press release, the central bank said in a statement.

In the last calender year, the RBI reduced key policy rates by 1.25 percentage points to 6.75 per cent.
However, in the Fifth Bi-monthly Monetary Policy Review announced in December the central bank had left the key interest rate unchanged.

New president of industry body Ficci Harshavardhan Neotia had recently pitched for lower interest rates saying the cost of funds was high and further reduction in interest rate would help to propel investments.

India Ratings and Research (Ind-Ra) said that amid the challenging corporate environment and limited fiscal space for the government, the RBI's role as a catalyst to boost growth may not be restricted to policy rates but also towards deploying alternative policy tools.

In the past, it said RBI used open market operations (OMOs) as purely a liquidity management tool.

"Evolving financial market conditions may in fact warrant RBI to assess the viability of OMOs as a tool to harmonise policy stance and effectively transmit monetary policy to the asset markets," it said.

A Citigroup report had said RBI is likely to keep key policy rates unchanged until the budget on February 29 and go for a 25 bps easing in March/April this year.

"As regards timing, we think RBI could ease right after the budget, potentially in March itself. We also note that the banking system will move to a new marginal cost-based lending rate regime from April 1st (for better transmission) which could influence timing as well," the report noted.

Finance Minister Arun Jaitley is scheduled to present the Budget for 2016-17 fiscal on February 29.

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