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RBI monetary policy review: Hope floats but will RBI bite bullet on rate cut?

All eyes are on the Reserve Bank of India as a six-member Monetary Policy Committee (MPC) headed by governor Urjit Patel began a two-day meet on Tuesday.

Mail Today Bureau   Mumbai     Last Updated: August 2, 2017  | 10:59 IST
Hope floats but will RBI bite bullet on rate cut?

All eyes are on the Reserve Bank of India as a six-member Monetary Policy Committee (MPC) headed by governor Urjit Patel began a two-day meet on Tuesday amid expectations that the central bank will cut key lending rates by at least 25 basis points on Wednesday as inflation has cooled to a record low.

The MPC is meeting for the third bi-monthly monetary policy review of 2017-18. As retail inflation touched a historic low of 1.54 per cent in June, some bankers and economists believe the RBI may change its stance and be more aggressive in cutting rates.
The panel, in its previous bimonthly review in June, had retained the repo rate at 6.25 per cent for the fourth straight time, citing risk to inflation.

Repo rate is the rate at which the RBI lends money to commercial banks for the short-term. The resolution of the MPC will be placed on the website at 2.30 pm on August 2, 2017, the central bank had said last month.

Commenting on the retail inflation data, chief economic adviser Arvind Subramanian had said the paradigm shift in inflationary process has been missed by all, who have made systematic inflation forecast error, apparently referring to the RBI.

In the last MPC, Patel had argued for avoiding premature policy action and waiting for more inflation data. Incoming data is expected to provide greater clarity on the durability of recent food and non-food disinflation, he had opined.

One of the MPC members, Ravindra Dholakia, however, had advocated a 50 basis point cut in the repo rate, saying several noteworthy developments recently on prices and output fronts warrant a decisive policy action

 

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