According to a source, the Reserve Bank of India is most likely going to keep the repo rate unchanged at 6% following April’s monetary policy review as a result of the stagnant inflation growth. According to economists, the inflation trajectory has turned out to be quite a surprise for them with the consumer price index (CPI)-based inflation marking 4.4% from the Reserve Bank of India’s projection of 5.1% in March. Experts believe that the inflation rate will dip further in March giving the Reserve Bank of India an opportunity to drop the repo rates. For those who do not know, the repo rate is basically the rate set for the money borrowed by a commercial bank from the Central Bank or the Reserve Bank of India to counter inflation.
According to Abheek Barua, chief economist of HDFC Bank, the inflation numbers have surprised them all and the repo rate will remain unchanged for the April monetary policy review as the Monetary Policy Committee is basically in the wait-and-watch mode. That said, he expects a hike in the latter part of the financial year. To add to his statement, Soumya Kanti Ghosh, group chief economist of SBI Group said that the inflation rate is expected to fall to 3.5%, which will give the Reserve Bank of India scope to slash the repo rate by 25 basis points. While a few economists believe that the repo rate will be cut by the RBI, other economists such as A.Prasanna, chief economist of ICICI Securities Primary Dealership and D.K Joshi, chief economist of Crisil, believe that the rates will rise following a stagnant six months – and it all depends on data on food prices and crude oil prices, etc.
Lastly, according to the Reserve Bank of India, the inflation trajectory depends on the price of crude oil, increase in the prices of crops, increase in custom duty, and the steep rise of house rent allowance by the Government of India.
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