RBI's MPC unlikely to announce a change in repo rate, according to an ET poll
RBI) is likely to keep interest rates unchanged this week as high food prices prevent any tilt toward softer policy, but easing core inflation and a global turn toward lower borrowing costs could make a case for the central bank to shift to a neutral stance in the next quarter that coincides with the country’s traditionally busy economic season.
An ET poll consisting of 12 respondents unanimously predicted the RBI’s Monetary Policy Committee (MPC) would keep the repo rate unchanged at 6.50% at the end of its three-day meeting on August 8. This would mark the ninth consecutive bi-monthly meeting in which the rate-setting panel could maintaine a status quo on rates.
The repo rate is the rate at which the RBI lends to banks.
“The June-July inflation undercurrents validate the MPC’s concerns over the near-term price outlook. To recall, June CPI inflation rose 5.1% yoy ...food and beverages added most to the headline, rising 8.4% from 7.9% before on higher vegetables, pulses and certain protein categories,” said Radhika Rao, senior economist, DBS Bank.
The MPC’s target for headline CPI inflation is 4%. The price gauge, however, has remained above that mark for 57 months in a row, with supply-side disruptions caused by the pandemic and the Russia-Ukraine war being the key drivers of higher consumer prices over the past couple of years.
More recently, a disappointing start to the monsoons and a protracted heatwave pushed up vegetable prices, while a telecom tariff hike could exert upward pressure on coming inflation
