Expect status quo in RBI's monetary policy review, says CARE Ratings

CARE Ratings on Tuesday said it expects a status quo in the RBI's fifth bi-monthly monetary policy review for this fiscal to be announced tomorrow. 

The Ratings said, "the MPC will be meeting amid a rise in GDP growth rate in Q2FY18 as against Q1FY18, upward inflationary biases due to rising food and oil prices, weak credit and deposit growth and a sharp rise in GSec yields." 
 
Citing factors favouring the status quo, the rating agency said, "upside risks to inflation may emanate from the following factors that would likely lead the RBI to remain watchful and maintain the status quo on policy rates during the MPC meeting."
 
The factors it highlighted include "specific products like tomatoes and onions have witnessed increase in prices. Future course of rabi crop is uncertain; the sustained increase in oil prices is an important concern, as OPEC re-affirms its efforts to rebalance the global supply glut."

"The Fed is expected to raise rates in mid-December, which may negatively impact FPI flows into India," said the Ratings, adding "lower GST rates on an array of products will lower pressure on inflation."  
  
Against this background, it further added, "we do expect status quo on interest rates as well as reserve requirements. A clearer picture on inflation by February could trigger interest rate action provided expectations are benign."

The agency note also mentioned growth in GDP, IIP, agriculture along with monetary backdrop and other reasons to support its expections on status quo.