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Chennai, March 31 (). Experts expressed mixed views on the decision the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will take in its April meeting.
One view is that the MPC is expected to increase the repo rate by 25 basis points (bps) next month, given that inflation remains firm.
The first meeting of the APC for FY24 will be held in the first week of April, where a decision on the repo rate will be taken.
The RBI’s decision in April is likely to be influenced by the unexpectedly high consumer price index (CPI) inflation numbers in the last two months, Care Ratings said in a report.
The January and February increase in CPI inflation, combined with core inflation remaining above 6 per cent, could push the policy outcome in favor of another rate hike, the report said. Furthermore, the latest inflation expectations data does not indicate a significant respite.
Also, the expectation of the Federal Reserve continuing its rate hike cycle to control inflation may support RBI’s decision to raise the repo rate before hitting the pause button in the April meeting.
Care Ratings said, we expect the RBI to increase the repo rate by 25 bps to 6.75 per cent in April. With real rates turning positive and liquidity conditions tight, we also expect a reversal of the stance from accommodative to neutral. ,
According to Lakshmi Iyer, CEO-Investment & Strategy, Kotak Investment Advisors Ltd. Volatility and uncertainty in global financial markets have increased over the past few weeks, although the European Central Bank and the US Federal Reserve hiked rates by 50 bps and 25 bps, respectively, in March.
Aiyar said, in India, the CPI remains above the 6 per cent range, including core inflation, which remains stable. However, the CPI is likely to ease in the coming months. Chances of a rate hike of 25 bps in the upcoming APMC are high. To hike or not to hike A hike may be the most talked about agenda, as the demand for stagnation only grows.
Interestingly, Churchill Bhatt, Executive Vice President and Debt Fund Manager, Kotak Mahindra Life Insurance Company said, MPC members are facing a turbulent global economic scenario versus a healthy and reasonably isolated economy.
We expect no change in stance in the MPC meeting on April 23, Bhatt said. The forward guidance by the MPC, if any, may be open-ended, leaving room for efficient dynamics depending on the evolving conditions in the global and domestic economy.
But whether the MPC members will share Bhatt’s views will be known only after their meeting.
It is also to be noted, the decision of the MPC to increase the repo rate in the recent past has not been unanimous, with some members voting against the decision.
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