RBI may hold key policy rates tomorrow on rising inflation, crude price concerns

New Delhi: With inflation rearing its head again and global crude oil prices inching up, the Reserve Bank of India (RBI) is likely to maintain the status quo on interest rates tomorrow at its bi-monthly monetary policy review for the current fiscal, say experts.

 RBI may hold key policy rates tomorrow on rising inflation, crude price concerns

Besides, the central bank may wait for the impact of delayed monsoon rains before making the next move. RBI Governor Raghuram Rajan, criticised for following hawkish monetary policy for too long before starting to lower rates, has reduced the benchmark interest rate by 1.5 percent since January last year. Since then, he has been persuading banks to fully transmit the benefit of the policy rate cut to

The customary post-policy press briefing by Rajan, whose current 3-year term as the central bank Governor ends in September, will also be closely watched for any cues relating to whether he is being given an extension.

"I don't see much in this credit policy. Interest rate wise, there would not be any change," IDBI Bank Managing Director Kishor Kharat said.

Tomorrow's review could also turn out be the last policy anchored by Rajan if the proposed Monetary Policy Committee (MPC) is put in place before the next review due on 9 August.

Economic Affairs Secretary Shaktikanta Das had said the panel would be vested with powers to decide on interest rates from September onwards. The six-member MPC will include RBI Governor and three nominees of the government, which has a mandate to bring consumer or CPI inflation to the pre-set target.

"RBI is likely to maintain status quo this time. Although there is consistency in inflation numbers, the last numbers do not give much comfort," a senior banker said.

"Only positive factor is good monsoon. RBI will wait for it to happen before taking any call on rate cuts," he said.

Retail inflation soared to 5.39 percent in April on higher food prices, reversing a downward trend seen in recent months.

"With inflation remaining sticky at slightly above 5 per cent and growth fairly steady (although uneven), we expect policy rates to stay on hold until end-2016 (including at the upcoming policy meeting on June 7) with the focus shifting to
liquidity provision," Nomura said in a report.

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Updated Date: Jun 06, 2016 17:51:45 IST

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