A Surprise Announcement or Maintaining Status Quo? Decision Shortly

The Reserve Bank of India (RBI) Monetary Policy will be announcing its decision on Friday. Will the central bank make a surprise announcement or maintain a status quo in interest rates? Experts believe that RBI is likely to keep the policy rates unchanged and maintain accomodative stance amid the growing uncertainty over COVID-19 pandemic. The fears of firming inflation might also refrain the MPC from tinkering with the interest rates on June 4.

The key lending rates is likely to continue at 4 per cent and the reverse repo rate or the central bank’s borrowing rate will be at 3.35 per cent. “The economic outlook remains uncertain in light of the continuing pandemic. We expect the monetary policy stance to remain accommodative for a large part of 2021, until the vaccine coverage improves dramatically,” said Aditi Nayar, chief economist at ICRA.

“The better-than-expected GDP numbers provide the much-needed comfort to the MPC on the growth outlook,” said M Govinda Rao, chief economic advisor, Brickwork Ratings. “The RBI Governor Shaktikanta Das faces a tough task this time, with a confluence of challenging parameters emerging in the economy on account of the second wave of covid and lurking uncertainties. The present double-digit wholesale price inflation is going to lead to a rapid jumping of retail inflation too, with a lag effect. This could prompt RBI to shift to a hawkish stance. However, in revival and sustenance, a bold approach is expected and desired from RBI with no change in repo rate,” said Jyoti Prakash Gadia, managing director, Resurgent India.