Nifty99000 100%

Sensex99000 100%

Article rating: 4.3
Article rating: No rating
Article rating: 2.0
Article rating: 1.5
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: 4.0
Article rating: No rating


Data points to RBI taking a hawkish stance this week

Author: IANS/Monday, June 4, 2018/Categories: Regulatory

Data points to RBI taking a hawkish stance this week

Mumbai, June 4 - The RBI's Monetary Policy Committee (MPC) meeting to decide on its second policy review of the fiscal got underway here on Monday to enable deliberations on interest rates the first time over a longer period of three days in the backdrop of surging global oil prices and higher domestic inflation.

In a notice issued in mid-May, the Reserve Bank of India (RBI) announced that this extraordinary extension of the MPC meeting due to "administrative exigencies" was one-off and there are no changes to the two-day meeting schedule for the rest of the fiscal. 

At its last bi-monthly monetary policy review in April, while holding its repo, or short term lending rate for banks, at 6 per cent for the fourth time in succession, the MPC had signalled the prospect of a more hawkish stance on interest rates. 

While the central bank continued with its 'neutral' stance, the released minutes of the MPC meeting showed that RBI Deputy Governor Viral Acharya is likely to vote for "withdrawal of accommodation" at the MPC meeting this time. 

"Since the last MPC meeting, I have moved substantially closer to switching from the neutral stance to beginning the process of withdrawal of accommodation. This is in spite of the softening of inflation in recent prints," said Acharya as per the minutes. 

"I view the (Inflation) risks as tilted significantly to the upside given the continuing rise in the ex-food-and-fuel inflation. Besides oil prices, my another primary concern is the risk of fiscal slippages, at both the Centre and state levels.

While the MPC may not by majority vote for a rate hike on Wednesday, recent data is fuelling fears of the RBI shifting to a hawkish stance. 

The country's retail inflation rose to 4.58 per cent in April from a rise of 4.28 per cent in March and 2.99 per cent in the corresponding period of the previous year. It has been quite some months outside the RBI's median target of 4 per cent. 

The Consumer Food Price Index in April was at 2.80 per cent and at a rate much higher than the 0.61 per cent rise during the same month last year.

The fourth quarter estimate of Gross Domestic Product (GDP) released by the Central Statistics Office estimated the growth rate at 7.7 per cent, as against 5.6 per cent, 6.3 per cent and 7 per cent respectively in the first three quarters. 

"Given the higher GDP growth rate released last week, the chances of a policy rate hike has risen, though not assured, as RBI would take a wait-and-watch approach," according to Devendra Nevgi, Founder and Principal Partner, Delta Global Partners.

According to RBI Governor Urjit Patel at the April meeting, the inflation outlook faces several uncertainties emanating from the increase in minimum support prices for kharif crops, volatile crude oil prices, "the staggered impact of revision in HRA by various state governments, fiscal slippages by the Centre and the states and the performance of the monsoon".

In a repeat of the previous policy review in February, five members of the MPC, including the three external ones and the Governor, voted in favour of the decision, while RBI Executive Director Michael Patra voted for an increase in the repo rate by 25 basis points.

Print Rate this article:
No rating

Number of views (168)/Comments (0)

rajyashree guha


Other posts by IANS
Contact author

Leave a comment

Add comment



Ask the Finapolis.

I'm not a robot
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest



The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free