RBI likely to keep key rate unchanged for 2nd time in a row

Vastavam web: The Reserve Bank is likely to keep the key rate unchanged on Wednesday and stay focused on inflation control as the rebound in September quarter GDP growth – after a five quarter decline – seemed to have eased pressure on it to lower rates, experts said.India Inc, however, is demanding interest rate cut to further build on positive sentiment generated by the rebound and upgrade of the country’s sovereign rating by Moody’s.In its October review, it had kept the benchmark interest rate unchanged on fears of rising inflation while lowering growth forecast to 6.7 per cent for the current fiscal.
The central bank had reduced the benchmark lending rate by 0.25 percentage points to 6 per cent in August, bringing it to a 6-year low.”It’s going to be a status quo. The liquidity in the system is very low, deposit rates are firming up and there are concerns about inflation,” said Union Bank MD and CEO Rajkiran Rai G.Global financial services major Nomura said while lower GST rates have moderated output prices, input cost pressures are marginally higher, which along with higher food inflation is likely to push retail inflation slightly above the RBI midpoint target of 4 per cent in November and beyond.Meanwhile, industry body Ficci said there has been positive news in the form of improvement in ease of doing business rankings, Moody s upgrade of India’s rating and the massive recapitalisation plan for banks.
“This is a good opportunity to further build on the confidence levels. The monetary policy announcement next week will be a perfect timing to give another shot to boost the sentiment,” said Ficci President Pankaj Patel in a statement.Credit rating firm ICRA has said RBI is likely to keep the key policy rate unchanged at 6 per cent as it expects retail inflation to firm up in the coming months.It said the (MPC) would leave the repo rate unchanged at 6 per cent “in a non-unanimous decision in the December 2017 policy review, given the expectation of a further rise in the CPI inflation in the coming months”.