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short-term lending rate by 40 basis points in an off-cycle monetary policy review to check spiraling inflation.
Also Read: RBI Monetary Policy Meet: When Is It, How to Watch Shaktikanta Das Address LIVE; Details
Almost all experts and economists said the MPC will decide to raise the repo rate given the high inflation in the country. RBI Governor Shaktikanta Das has also said the expectation of a rate hike is a no-brainer.
In an off-cycle monetary policy review, the RBI’s MPC last month raised the repo rate by 40 basis points to rein in inflation. In the April policy review, the Committee had maintained the status quo on the key policy rate to keep it at four per cent.
Apart from this, experts also said the central bank is likely to raise the cash reserve ratio (CRR) in one of the upcoming policies but will be contingent on how it sees the durable liquidity panning out in the next few months.
The policy stance of the MPC will be the key to watch out for, as the future policy actions of the RBI will depend on this. In the off-cycle policy review last month, the MPC had retained its ‘accommodative’ monetary policy stance.
Rumki Majumdar, economist, Deloitte, said: “The forward guidance and communication about the monetary policy stance-despite raising the policy rates, the monetary policy stance has remained accommodative. Given the capital outflows that India has witnessed lately, managing liquidity conditions will be critical for healthy credit growth and business and consumer confidence.”
Another area of focus will be the Reserve Bank of India’s commentary on inflation. The retail inflation in April stood at an eight-year high of 7.79 per cent, forcing the RBI to hike interest rates in the off-cycle monetary policy last month.
In the April MPC meet, the RBI had revised upwards its retail inflation forecast to 5.7 per cent for the current financial year 2022-23, as compared with the 4.5 per cent projected earlier.
Asutosh Mishra, head Of research, institutional equity, Ashika Group, said: “Apart from rate action, we will keenly watch RBI’s Inflation forecast along with any changes in GDP growth estimates. It will be also interesting to know the future guidance of RBI on managing the growth inflation dynamics.”
Apart from these, other key announcements related to loans, cryptocurrencies, liquidity, etc, if any, will also be watched out for.
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