every month Reserve Bank of India (RBI) issues its own bulletin. It was an analysis of the economy. The market also keeps an eye on this bulletin. This helps in predicting when the central bank may change its policies, rates and stance. The market expects monetary policy to remain muted in the October policy meet from RBI’s bulletin. Let’s know why.
RBI looks positive on economic recovery. This expectation about recovery in RBI has been generated in view of the increase in export, toll and tax collection. According to RBI, sales of 1,427 companies with 86 per cent market share grew 57 per cent year-on-year in the first quarter, but declined by 9 per cent on a quarterly basis. Demand also seems to be getting back on track. But it may take some more time for it to catch on. This is an indication that while RBI is positive on growth, it will still maintain a soft stance.
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RBI has said in its bulletin that the inflation rate was high in May. In the first quarter, the CPI stood at 5.6 per cent, while the MPC had projected it to be at 5.2 per cent. Now RBI believes that the worst phase of inflation has passed. Here now the rate of inflation will remain in the range of its estimate of 5.7 percent. From this we can infer that RBI will remain in the era of soft policies.
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The central bank has also said in this bulletin that its plan to reduce liquidity should not be seen as its attempt to raise rates through the back door. This bulletin of RBI has been written by Deputy Governor Michael Patra. Market estimates that based on the above analysis, it can be said that Michael Patra’s stance will remain soft in the policy coming in October. However, two members of the RBI MPC, Jayant Verma and Dr. Mridul Sagar are known for their Hawkish approach.
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Apart from these, it can be inferred from the comments made in the previous policy of 3 other members Governor Dr. Shaktikanta Das, Dr. Ashima Goyal and Shashank Bhide that their attitude will remain soft. In this way, there is a majority of people in the MPC committee who are in favor of easing monetary policies. At least, keeping in mind the October policy, this can be said.
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