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RBI MPC: Upcoming meet between governor, economists to begin from today; decision on repo, CRR rates on June 8

RBI MPC: Upcoming meet between governor, economists to begin from today; decision on repo, CRR rates on June 8

RBI Governor Shaktikanta Das is expected to announce the MPC’s key decisions regarding key interest rates, CRR and policy amendments on June 8.

The government has tasked the RBI to ensure the consumer price index-based inflation (CPI) remains 4 per cent with a margin of 2 per cent on either side.   The government has tasked the RBI to ensure the consumer price index-based inflation (CPI) remains 4 per cent with a margin of 2 per cent on either side.  

Reserve Bank of India’s upcoming monetary policy meeting is all set to begin from June 6. The meeting is set to last from June 6 to June 8. RBI Governor Shaktikanta Das will announce the MPC’s key decisions regarding key interest rates, CRR and policy amendments on June 8. 

Retail inflation, an important factor considered by the RBI while arriving at monetary policy, went up for the seventh month to hit 8-year high of 7.79 per cent in April due to surging commodity prices including fuel on account of the Ukraine crisis. Wholesale price-based inflation (WPI) has remained in double digits for 13 months and hit a record 15.08 per cent in April.  

Shaktikanta Das said in a recent TV interview that the “expectation of rate hike is a no-brainer, there will be some increase in the repo rates but by how much I will not be able to tell now but to say that 5.15 may not be very accurate.” 

Experts believe that the central bank could hike repo rate by 40 bps over and above the 40 bps hike effected from May 4 after an off-cycle MPC meeting in its upcoming MPC outcome on June 8.  

Group CEO of Housing.com, PropTiger.com and Makaan.com Dhruv Agarwala said that the central bank may hike repo rate once again in a bid to contain inflation largely driven by global issues like the Russia-Ukraine war.  

Agarwala said, “At this juncture, we can understand the compulsion of the RBI to raise interest rates. However, the hike should be gradual as it could impact the growth of the real estate sector which is a major driver of the economy.” 

Quantum AMC fund manager-fixed income Pankaj Pathak said, “We expect that the RBI may hike the repo rate by another 35-40 basis points in the June meeting. However, we will not be surprised if they prefer to go slow on rate hikes given the government is also responding to inflation risks. The recent announcement on fuel rate cuts and reduction of import duties on edible oils will provide some comfort to the RBI.” 

He also said that the RBI’s surprise hike in CRR rate at the start of the month led to expectations of a further hike in CRR rate in the June policy, adding surplus liquidity in the banking system has gone down. He added, “We believe the RBI will be comfortable with this level of liquidity at this juncture. So, it may keep the CRR rate unchanged. The bond market is already positioned for frontloaded rate hikes.” 

Chief Economist and Bank of Baroda Madan Sabnavis, however, told news agency PTI, that the upcoming credit policy announcement will be important from the perspective of not only rate action but also the RBI’s thoughts on growth and inflation.  

He said, “The increase in repo rate can be taken as almost given the quantum may not be more than 25/35 bps as the earlier minutes of the meeting held in May indicated that the MPC was not in favour of a large increase in repo rate at one shot.” 

The government has tasked the RBI to ensure the consumer price index-based inflation (CPI) remains 4 per cent with a margin of 2 per cent on either side.  

(With inputs from Rahul Oberoi, PTI)