The Reserve Bank of India (RBI) will announce its bi-monthly monetary policy on Friday, and amid inflationary concerns, the central bank is expected to maintain the status quo on interest rates. Higher commodity prices and rising global rates following the Covid-19 recovery have serious implications on production costs, according to financial experts cited by PTI. RBI is expected to adopt a “wait-and-see” strategy because it has little room to manoeuvre monetary policies.
“Higher commodity prices and rising global prices post the robust recovery in a few industrial countries will have implications on production costs,” Rumki Majumdar, an economist with Deloitte India, was quoted as saying by PTI.
“We expect the RBI MPC to look through the transitory hump in inflation and stick with a unanimous dovish pause in the upcoming August 6 policy. The MPC is likely to revise up its FY22 average CPI inflation forecast slightly from the previous 5.1 per cent and flag potential upside risks,” according to a BofA Global Research report quoted by PTI.
According to a recent RBI article, the government has mandated the central bank to keep inflation based on the Consumer Price Index (CPI) at 4% with a 2% margin on either side.
According to PTI, inflation is expected to remain high for a few months before easing in the third quarter of 2021-22, when the kharif harvest arrives in markets.
Following the June MPC meeting, the RBI kept the benchmark interest rate at 4%. For the sixth time in a row, the MPC kept the interest rate at the same level.
