Monetary policy meet from today: RBI likely to keep rates unchanged, may review growth & inflation forecasts, say experts

The Reserve Bank of India (RBI) is expected keep key lending rates unchanged and maintain an accommodative stance in monetary policy committee meeting, which starts on Wednesday April 6, as per brokerages and experts. The MPC meeting will conclude on April 8.    

As per Bank of America (BofA) Securities, RBI is likely to remain accommodative, leave all rates unchanged in April policy meet. But the central bank will be pushed to revise upwards its CPI inflation forecast due to supply-side issues even as downside risks to growth rise, it underlines

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The MPC is expected to revise its Consumer Price Index-based inflation forecast, whereas the growth projections for 2022-23 would be pared, says ICRA Limited,

“The MPC is unlikely to sacrifice growth to control imported inflation. With the upper threshold of the medium-term inflation target range being as high as 6 per cent, the MPC is likely to remain growth supportive for longer than other central banks. Overall, we expect a status quo policy in April 2022,” said ICRA report.

Madan Sabnavis, Chief Economist, Bank of Baroda, expects the MPC to review the earlier forecasts of both growth and inflation for FY23.  

"Growth is likely to be revised downwards, while inflation would be probably at least 100 bps higher given the evolving conditions. Based on the commentary provided last time, there would be a status quo position maintained on both the repo and reverse repo rates," says the BoB Chief Economist.  

However, with inflation rising prodigiously, there should be active consideration of change in stance from accommodative to neutral, says Sabnavis.  

"This would signal to the market that there would be possible repo rate hikes in the coming months if inflation remains intransigent at the present level. There would also be some indication given on the currency in general terms of support like the swap operations which will assuage the market," added the expert.

As per Shivam Bajaj, Founder & CEO at Avener Capital, In the last MPC meeting, RBI attributed high inflation largely due to supply side pressures and hence they could be keen to maintain a more accommodative policy in this time MPC.  

"There is likely to be a renewed optimism in regard to inflation on the back of the USA announcing a massive release in the country’s strategic oil reserves and Russia offering crude oil to India at a big discount," says the expert

Bajaj said central Banks globally have embarked upon raising Interest rates to curb inflationary pressure. However, India so far has maintained a more accommodative policy. Retail inflation in India in Feb 2022 rose to 8 Months high of 6.07% which is outside the RBIs target range of 4-6%. The tightening of monetary policy can assist in curbing demand but not in augmenting supply," he adds.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)