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RBI may maintain status-quo on interest rate
August 03, 2023
The Reserve Bank is likely to maintain status-quo on the key interest rates for the third time in a row in its upcoming bi-monthly policy review despite the US Federal Reserve and the European Central Bank hiking benchmark rates, as domestic inflation is within the RBI’s comfort zone, say experts.
The borrowing cost which started rising in May last year has stabilised with RBI keeping the repo rate unchanged at 6.5 per cent since February when it was raised from 6.25 per cent. In the previous two bi-monthly policy reviews in April and June the benchmark rate was retained.
The RBI Governor-headed six-member Monetary Policy Committee (MPC) is scheduled on August 8-10. The policy decision would be announced on August 10 by Governor Shaktikanta Das. “We do expect the RBI to hold on to a status quo position on both rates and stance.
The reason is that while inflation is presently running at less than 5 per cent there would be some upside risk to this number in the coming months with prices of vegetables and pulses going up sharply. Therefore, an extended pause is expected,” said Madan Sabnavis, Chief Economist, Bank of Baroda. In fact, he added that with the RBI having a forecast of inflation of 5.4 percent for the third quarter, it looks unlikely that the repo rate or stance may be changed till the beginning of the next calendar year.
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