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RBIs 3-day MPC Meet Today; Final Decision To Out On Friday

Shaktikanta Das, the Governor of RBI is going to announce the decision of the six-member Monetary Policy Committee (MPC) on Friday.

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The Reserve Bank of India's rate-setting panel, on Wednesday, initiated its three-day deliberations on the next bi-monthly monetary policy, amid a sharp surge in global commodity prices and the requirement to contain domestic inflation. 

Suvodeep Rakshit, Senior Economist at Kotak Institutional Equities, on Wednesday, said the monetary policy meetings seem to have reached a stage where decisions from the RBI will be more keenly watched than what the MPC delivers. 

"In the October meeting, the markets will be watching for RBI’s signals on addressing the liquidity glut along with the normalization of reverse repo rates. The MPC will likely continue to stick with the accommodative stance, for now, while keeping the repo rate unchanged," Rakshit said. 

Shaktikanta Das, the Governor of RBI is going to announce the decision of the six-member Monetary Policy Committee (MPC) on Friday. 

There are several experts who think that RBI is going to keep the status quo on policy rates for the eighth time in a row. 

Presently, the policy repo rate also known as the short-term lending rate is at 4 per cent, meanwhile, the reverse repo rate is 3.35 per cent. 

Rakshit also said, "With a mixed bag in terms of both growth and inflation outlook, the RBI and MPC will want to wait for a clearer picture. But as the economy recovers, and given the financial stability perspective, it is also essential to gradually withdraw the excess liquidity and reverse an ultra-low interest rate regime with likely incipient asset price dislocations."

Rakshit also said that the Central Bank needs to telegraph a path of normalization rather than let market expectations anchor unsuitably. "The RBI has rightly focused on the near-term till now, and the October policy will be the perfect window to outline its thoughts on normalization, especially since the RBI will certainly want to avoid any sudden tightening," Rakshit added. 


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