Heightened geopolitical uncertainties will lead the Reserve Bank's rate-setting panel to opt for a status quo at the next week's meeting, Axis Bank's chief economist Saugata Bhattacharya said on Monday. Bhattacharya said he had earlier expected a tightening action at the policy meet scheduled for April 6-8 but the increased uncertainties on the geopolitical front due to the Russian invasion of Ukraine and its impact on commodity prices makes him now think that RBI will defer such an action. He said the central bank's Monetary Policy Committee (MPC) may hike rates in the second half of FY23 by up to 0.50 per cent.
The duty cuts and export restrictions imposed by the government to control inflation may only have a marginal impact, economists have said. The long-term solution, they say, is to boost agricultural production to enable the sector to ride out of the current slump.
The Reserve Bank may go for a final 25 basis points increase in the current rate hike cycle next week and a reduction would come in only by the end of third quarter of FY24, economists at Axis Bank said on Wednesday. As per media reports, RBI officials met economists on Tuesday, and the latter have suggested the central bank to go for a 25 basis points hike in key rates. Since May 2022, the RBI has hiked rates by 250 basis points, hurting borrowers and some are already concerned about loan tenors extending beyond their working lives as a result of the hikes.
Prime Minister's key economic advisor C Rangarajan on Friday lowered the growth forecast for the current fiscal to 5.3 per cent from 6.4 per cent projected earlier and listed out host of measures including further liberalisation of foreign direct investment norms to improve economic condition.
Price rise in services sector after the goods and services tax (GST) gets implemented and the pay hike of central government employees will make inflation control a tough job for the central bank
The RBI is understood to be dithering since it would want more clarity on the cost of the fiscal policies the new government would undertake before it decides to cut rates, even though it has pencilled in a lower gross domestic product growth rate for this fiscal year.
On the rupee, it expects some appreciation pressure on in the near term from greater portfolio flows.
However, RBI would continue to nudge banks to cut lending rates
Analysts have started talking about at least a 25 bps cut immediately.
Growth impulses, while improving, remain fragile, and a rate hike will be disruptive to interest costs.
Government has forecast annual economic growth to rise to 7.4%.
He noted that the Rupee has firmed recently but cautioned that the currency should not lose its competitiveness in global trade.
High inflation print is the price that the Reserve Bank of India (RBI) will have to pay to nurse a fragile growth back, say economists. Wholesale Price Index-based inflation rose to a record high of 12.94 per cent in May, aided by low base effect, but also because of higher fuel and commodity prices. Retail inflation, too, surprised by rising to 6.30 per cent, while the core inflation, which is the non-food and non-fuel component, rose to an 83-month high of 6.55 per cent. These numbers are much above RBI's upper limit of 6 per cent inflation target, but there is very little that the RBI can do at this moment.
The Reserve Bank of India (RBI) is precariously balancing two opposing objectives - maintaining easy financial condition in the domestic market, while ensuring external stability - and economists have started taking note. They say India is going through the classic trilemma of the 'Impossible Trinity'. The RBI cannot have an independent monetary policy (setting domestic interest rates) in an environment of an open capital account and flexible exchange rates. What is even more complicated for the central bank now is that financial market stability overlays all the other three objectives.
While Raghuram Rajan has said in the past that other factors, including domestic fundamentals, outweigh the US Fed policy meet, this time it would be different
There is a near consensus that at least a 25 basis points cut, if not 50, can be expected in the June policy.
The central government's deposits with the RBI had fallen to just Rs 100 crore as of June 8.
What the reserves offer for now is improved import coverage of about 13 months, almost double the 2013 level of less than seven months. And, ammunition to arrest a rapid rupee slide, says Anup Roy.
A strong currency helps in fighting some of the import-led inflation.
The Reserve Bank of India cut its repo rate by 25 basis points to 6.50 per cent.
RBI's surprise rate cut has revived sentiments of India Inc.
The Modi government has handled inflation far better than any government in the past two decades. Both the stock market and currency indices have begun to show confidence in the economy, despite the mounting global headwinds of trade.
'The current economic contraction is certainly due to the lockdowns as a response to the pandemic, which is an act of God.' 'Nobody has seen such a thing in the last 100 years.' 'Saying that this was an act of mismanagement is largely incorrect'
It is possible that the final Budget architecture may be at variance with the comments.
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