For the fiscal year 2021- 22, the RBI is scheduled to reveal the outcome of its first bi-monthly monetary policy meet on April 7, 2021. In all likelihood, the apex bank may remain pat on key policy rate owing to uncertainty that has once again gripped markets due to the rising Covid 19 cases across the country.
In its last MPC of the fiscal year 2021 held in February, the MPC decided to keep interest rates steady citing inflationary concerns. And experts are of the view that RBI would continue with its accomodative stance until it sees opportune time to push economic growth without compromising on the main objective of taming inflation.
Dun and Bradstreet in a report said the recent spike in Covid 19 cases and the curbs imposed by different states will yet again render revival of industrial production a daunting task. The chief economist there said long term yields are increasing, which in turn are pushing borrowing costs higher.
“In this context, the Reserve Bank of India faces the difficult task of managing the inflationary pressures while preventing a rise in the borrowing cost.
“Despite the rising inflationary pressures, we expect the RBI to keep the policy repo rate unchanged in the forthcoming monetary policy review in view of the uncertainty posed by the sharp rise in COVID-19 cases,” he said.
Moreover UBS Securities India economist hails that the RBI will maintain enough liquidity in the near term for ensuring least disruption in the centre’s borrowing plan and support the economic recovery at a time when Covid 19 cases are resurging in the country.
“We continue to expect the central bank to pursue policy normalisation in the second half of FY22 to keep inflationary pressures contained and preserve financial stability.
“In our base case, we expect the MPC to shift towards a neutral policy stance and/or pursue reverse repo rate hikes (25-40bp) without recourse to policy (repo) rate hikes in FY22. We expect the repo rate to be hiked by 50 bps but only towards H2FY23,” said the economist at UBS.
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