RBI Likely To Maintain Status Quo On June 7: Experts

New Delhi: With retail inflation showing signs of hardening, Reserve Bank of India Governor Raghuram Rajan may maintain status quo in the bi-monthly monetary policy review on Tuesday and wait for the impact of delayed monsoon rains before making the next move, say experts.

Mr Rajan, criticised for following a hawkish monetary policy for too long before starting to lower rates, has reduced the benchmark interest rate by 1.5 per cent since January last year. Since then, he has been persuading banks to fully transmit the benefit of the policy rate cut to customers.

The customary post-policy press briefing by Mr Rajan, whose current 3-year term as Governor of the central bank ends in September, will also be closely watched for any cues relating to whether he is being given an extension.

Retail inflation soared to 5.39 per cent in April on higher food prices, reversing a downward trend seen in recent months.

After a gap of six months, the RBI had cut repo rate, at which it lends to other banks, by 0.25 per cent to 6.5 per cent in April. It was the first bi-monthly monetary policy review of the current financial year 2016-17.

Besides inflation, the crude oil price is also looking up and has touched $50 a barrel, from a low of about $30 per barrel, and could increase inflationary pressures.

However, some experts feel that there is a strong case of rate reduction in the upcoming policy.

According to India Ratings and Research, the RBI is likely to maintain a status-quo on interest rates as it focuses on inflation control, liquidity management and pending policy transmission in the near-term.

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Source:Ndtv

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