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RBI Monetary policy on Tuesday.. Probably no changes..?

The Reserve Bank of India (RBI) may maintain the status quo in the upcoming annual monetary policy on April 1 as retail inflation, especially in food items, is yet to show definite signs of moderation. "It would be quite a tough call for the RBI in the given scenario... I expect the RBI to maintain the status quo," HSBC country head Naina Lal Kidwai said.
RBI too had earlier indicated that its priority would be to bring down inflation, although India Inc has been putting pressure on the central bank to cut rates in order to boost growth.
In its third quarter review of monetary policy, the RBI in January raised the key repo rate by 0.25% to 8% in a bid to curb inflation.
Besides outlook on inflation, the central bank would also take into account the strengthening rupee and its impact on exports, she added.
Strengthening of the rupee against the dollar in the past few days following inflow of foreign currency has put pressure on exports. In addition, unseasonal rains during this month may stoke food inflation in the near term.
The RBI is scheduled to announce its annual monetary policy for 2014-15 on April 1.
"In my view RBI may go for a pause this time," Federal Bank MD Shyam Srinivasan said. According to PNB chairman and MD, KR Kamath, the RBI action will depend on outlook on inflation.
The annual rate of inflation, based on the monthly wholesale price index, stood at 4.68% in February. Retail inflation was at a 25-month low of 8.1% in the month.
Morgan Stanley said volatility in food prices and a base effect will result in the CPI inflation going up to 8.5% in the near-term and cooling off to 6.5% by December. "We see risks emerging to the food inflation outlook due to the recent weather-related concerns prompted by unseasonal rain and hailstorms in some parts of the country," it said.
Raghuram Rajan, who took charge as RBI governor last September, raised the rates during his first policy announcement, rightly foreseeing pressure on the inflation front. He increased it again for a third time since he has taken charge.
RBI Monetary policy on Tuesday.. Probably no changes..? Reviewed by Manohar Veera on 5:49:00 PM Rating: 5

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