RBI, Wary On Inflation, Set To Keep Rates On Hold
All but two of 54 analysts in a Reuters Poll said the repo rate would be left at 6.00 percent, the lowest since November 2010. In August, the RBI made its only cut in 2017, of 25 basis points, and in October, it held
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The Reserve Bank of India (RBI) looks set to keep its policy rate on hold on Wednesday, after inflation accelerated to a seven-month high and stronger economic growth reduced the need for monetary stimulus.
All but two of 54 analysts in a Reuters Poll said the repo rate would be left at 6.00 percent, the lowest since November 2010. In August, the RBI made its only cut in 2017, of 25 basis points, and in October, it held.
On Wednesday, after a two-day meeting, the RBI is likely to reiterate concern about inflation, as the annual rate increased to 3.58 percent in October. That's low by Indian standards, but not far from the central bank's 4 percent target.
Another source of RBI discomfort is that core inflation, which excludes food and energy prices, has remained stubbornly high at around 4.5 percent. The central bank is likely to reiterate a "neutral" stance, thus giving itself flexibility to cut rates in February, even though only seven of the 48 analysts in the Reuters poll who gave a view on 2018's first meeting expect that outcome.
Last week, there was welcome news of a recovery in annual economic growth in July-September to 6.3 percent, from 5.7 percent the previous quarter. "The recovery is a source of comfort to the RBI as it lowers pressure on them to take a growth-supportive stance," said Radhika Rao, an economist at DBS in Singapore.
But the latest pace is still well below the 8 percent level India needs to create millions of jobs each year for youths.