RBI likely to keep key policy rates unchanged for rest of FY19 as inflation may stay 'benign': Report

New Delhi: The Reserve Bank of India is expected to keep key policy rates unchanged in the remaining 2018-19 fiscal as inflation may stay ‘benign’ in the range of 3 to 4.4 percent, says a report. According to the report by Kotak Economic Research, the focus of the Monetary Policy Committee (MPC) remains purely on inflation print, which is expected to remain benign ( 3-4.4 percent) in the second half of 2018-19. “We thus see limited scope for rate hikes in the rest of 2018-19,” the report added. [caption id=“attachment_5129811” align=“alignleft” width=“380”] Representational image. Reuters[/caption] In the policy review meeting earlier this month, a majority of RBI’s six-member MPC, including Governor Urjit R Patel, favoured to keep the key repo rate unchanged as part of “calibrated tightening” to keep retail inflation at 4 percent. “The minutes reaffirmed our view post the October policy and the September CPI inflation print, that the RBI will possibly stay on hold for the rest of 2018-19,” the report said. It, however, added that upside risks to inflation still exist owing to pass-through of MSPs, elevated crude oil prices, volatility in global financial markets, hardening of input prices amid rupee weakness and staggered impact of HRA increases by states and its second-round impact. “However, the seemingly structurally benign food inflation along with softening growth should help in capping the upside pressures, thereby providing RBI the comfort of staying on pause mode in the foreseeable future,” it said. During its October monetary policy review, RBI kept the key repo rate unchanged at 6.50 percent.