RBI may maintain status quo in April monetary policy review as inflation cools off: Analysts
A meeting of the rate setting panel, the MPC, will begin on 4 April and the resolution will be announced the next day.
Mumbai: The Reserve Bank of India (RBI) is likely to go for a status quo in policy rates at next week's monetary policy review on a cool-off in inflation, analysts said on Monday.
"We expect the MPC (monetary policy committee) to keep policy rates on hold and maintain its neutral stance," analysts at American brokerage Morgan Stanley said in a note. Its rival Bank of America Merill Lynch (BofAML) also seemed to be echoing the same view, but added that it expects a rate cut in the August review if the monsoons are favourable.
"We expect the RBI MPC to strike a balanced tone on April 5, with March quarter inflation set to average 4.6 percent, 0.50 percent below their 5.1 percent forecast," it said in a note on Monday. After surging to a concerning 5.2 percent in December, the headline inflation cooled-off to 4.4 percent for February and is expected to go down further.
A meeting of the rate setting panel, the MPC, will begin on 4 April and the resolution will be announced the next day. Governor Urijit Patel will also be holding the customary post-policy interaction with journalists, which will be the first such conference after the nearly Rs 13,000-crore Punjab National Bank (PNB) scam came to light.
Analysts at Morgan Stanley said the six-member MPC will vote in the same pattern as last policy review, of 5:1 in favour of status quo, with Dr Michael Patra being the only one who would vote for a 0.25 percent hike in rates. BofAML analysts said inflation may be higher for the June quarter, but added that the RBI will see through the print because of the lower base in the year-ago period.
On the growth front, they said the RBI may indicate that the recovery is at an early stage and hence, there may be a case for continuing with the neutral stance.
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RBI had last revised its policy rate on May 22, in an off-policy cycle to perk up demand by cutting interest rate to historic low.
The RBI governor said preserving long-term stability of the financial system is the key to recovery of economic growth
Jagdishan, a chartered accountant by profession, is a science graduate and has a Master's degree in Economics of Money, Banking and Finance. He has over 29 years of experience in the banking industry