The Reserve Bank of India (RBI) may once again cut the repo rate by 25 bps or a quarter. If this happens, the repo rate may fall to a record low of 3.75 per cent. Such an expectation has been expressed in a Reuters poll. The meeting of the RBI’s Monetary Policy Committee (MPC) will begin on Tuesday. It will be at the lowest level since 1979.
The meeting will start on Tuesday; the decision will be taken on 6
In a Reuters poll, nearly two-thirds of economists expect the RBI to cut another repo rate on 6 August. If this happens, the repo rate could come down to a record low of 3.50 per cent in the next quarter. The final decision of RBI’s Monetary Policy Committee (MPC) will come on 6 August. Barclays economist Rahul Bajoria expects a cut of 25 basis points.
He said that high inflation has led to confusion in the policy outlook of the Reserve Bank, but given the demand situation, we speculate that RBI will not take any hard decision.
Retail inflation rises above 6 per cent in June
Annual retail inflation rose to 6.09 per cent in June. It was 5.84% in March. This is above the RBI’s mid-term target range of 2-6%. Recent RBI policies focus on financial stability and the need to support growth despite price targets. India was placed under one of the world’s strictest lockdowns from late March to May to prevent the spread of coronavirus. The government gradually relaxed restrictions in June.
The economy can remain negative until December
According to the survey, most analysts are expecting the economy to remain negative until the December quarter. The economy may weaken to 5.1 per cent for the full year in 2020-21. This will be the weakest performance since 1979. According to Upasana Bhardwaj, an economist at Kotak Mahindra Bank, in addition to the rate cut, RBI may also make some announcements regarding liquidity and regulatory measures.
Cut by 1.15 per cent since February
He says that the 25 bps reduction will not have much effect in the current environment. RBI should cut by at least 75 bps. Explain that the RBI has cut the repo rate by 1.15 per cent since February. Whereas from last year till now, there has been a cut of 1.35 per cent. Some economists believe that the RBI will not cut the repo rate in August.