RBI likely to hold rates, talk tough on managing price rise
RBI) is likely to keep interest rates on hold for the third straight monetary policy meeting this week, but is seen talking tough on managing consumer prices as inflation is expected to shoot past the central bank's comfort zone after certain food items turned dearer. According to an ET Poll of 15 respondents, at the end of its August 8-10 meeting, the RBI's Monetary Policy Committee is seen keeping the repo rate unchanged at 6.50% and maintaining its prevailing stance of withdrawal of accommodation.
The MPC has raised the repo rate by a total of 250 basis points from May 2022 to February 2023 to tackle elevated inflation. While Consumer Price Index inflation registered sharp declines in March, April and May, the price gauge started to reverse direction in June, with hardening vegetable prices, particularly of tomatoes, playing spoilsport.
The trend is expected to continue in July, with several economists predicting CPI inflation at 6.0-6.5% as against 4.81% in June. The MPC's tolerance band for CPI inflation is 2-6%.
«The MPC's tone is likely to have a strong focus on inflation management, given the likelihood of two successive (inflation) prints above 6%. In terms of forecast changes it is better to wait for the September or October policy because they will have more clarity on the monsoon,» said Anubhuti Sahay, Standard Chartered Bank's Head of South Asia Economic Research.
The MPC, which has forecast CPI inflation at 5.1% in FY24, sees the gauge at 5.2% in the on-going quarter.INFLATION VIEW A key aspect that is awaited from the monetary policy statement is the rate-setting panel's estimate for inflation in the first quarter of the next financial year. In the April Monetary Policy Report, the RBI had forecast average
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