The Reserve Bank of India (RBI) is most likely to make any changes in key policy rates unchanged in the remaining 2018-19 fiscal in the wake of the inflation.
As stated in a report by Kotak Economic Research, the focus of the Monetary Policy Committee (MPC) is expected to be remaining entirely on inflation print, which is anticipated to remain benign ( 3-4.4 percent) in the second half of 2018-19.
“We thus see limited scope for rate hikes in the rest of 2018-19,” the report added.
In the policy review meeting held this month, majority of RBI’s six-member MPC, including Governor Urjit R Patel had pitched for no change in key repo rate as part of “calibrated tightening” to keep retail inflation at 4 percent.
“The minutes reaffirmed our view post the October policy and the September CPI inflation print, that the RBI will possibly stay on hold for the rest of 2018-19,” the report said.
The report further stated that upside risks to inflation still exist due to pass-through of MSPs, inflated crude oil prices, instability in global financial markets, coagulating of input prices amid rupee weakness and staggering impact of HRA increases by states and its second-round impact. “However, the seemingly structurally benign food inflation along with softening growth should help in capping the upside pressures, thereby providing RBI the comfort of staying on pause mode in the foreseeable future,” it said.
RBI kept its key repo rate unchanged at 6.50 percent during its October monetary policy review.