Whether the RBI will cut the rate on Wednesday or not has become the most important question.
If we look at the data of inflation, the stage to reduce interest rates for RBI is fully ready. But is the country’s central bank really going to cut interest rates on Wednesday? This question has become the biggest. There is also the reason for this. There is no reduced inflation and trump tariff in front of RBI. There is also a fall of the rupee in front of the RBI, which is constantly making imports expensive. The effect of which is also being seen continuously on the economy. Recently, a survey has been conducted by Bloomberg, in which 24 of the 38 economists have been estimated not to cut interest rates. While 14 economists say that RBI can cut interest rates by 25 basis points.
RBI eye on many fronts
The six -member monetary policy led by Governor Sanjay Malhotra will have to fulfill several competitive objectives this week. Inflation, which is hovering around the lower end of the target band of 2 per cent-6 per cent, is expected to decrease further after the tax deduction, while the growth is likely to shock due to the imposition of 50 per cent export tariff by US President Donald Trump. At the same time, the record of the rupee falling at the lowest level and Malhotra’s cautious stance towards cuts in interest rates, is causing obstacles in the path of relief. The central bank cut interest rates by 1 per cent this year, but it was stopped in the last MPC meeting held in August.
RBI can keep interest rates stable
Aastha Gudwani, an economist of Barclays PLC, said in a note that we believe it is a close match – because by adopting a policy soft trend, the cut in interest rates can be postponed till December meeting. He further said that due to the stance of adopting an aggressive stance from neutral in the past, a well-planned strategy can be adopted instead of cutting interest rates completely. The comment and approach on the economic development of the governor for the signs of the future monetary policy will be closely monitored. Economists feel that the repo rate in this bicycle can come up to 5 percent.
Estimation of inflation and growth
There is no possibility of any change in RBI’s growth forecasts. Cuts can be cut by changing inflation estimates. Inflation in August increased to 2.07 percent, yet due to better monsoon rains and GST cuts, the forecast still remains favorable. The RBI had estimated 3.1 percent inflation for the current financial year which started in April. Economist Gaurav Kapoor, Economist of IndusInd Bank Limited, estimates that the average inflation may be around 2.7 percent this year. A top official said that tax deduction is expected to compensate for the damage caused by tariffs and maintain the growth rate around the upper level of the government’s upper level of 6.3 per cent-6.8 per cent forecast. RBI estimates the growth rate of 6.5 percent in this financial year.