RBI expected to maintain policy rate at next review meeting, says Crisil

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Crisil, a renowned credit rating agency, has stated that the Reserve Bank of India's (RBI) monetary policy committee is likely to keep the policy rate unchanged in its upcoming meeting, as the central bank awaits more clarity on the inflation trajectory.

The next monetary policy meeting of the RBI is scheduled for early October.

According to a report titled "RateView - CRISIL's Outlook on Near-Term Rates," the uncertainty regarding inflation has increased due to recent spikes in food prices. Factors such as monsoon disruptions, weather conditions, government interventions, and global food supply will influence the outcome of inflation.

Crisil indicated that there's a conditional possibility of a 25-basis point rate cut in early 2024.

In the recent August meeting, the RBI decided to maintain policy rates while continuing its stance of "withdrawal of accommodation." Additionally, the central bank introduced the Incremental Cash Reserve Ratio (I-CRR) as a temporary measure to manage liquidity.

Considering the recent increase in retail inflation figures, Crisil revised its inflation outlook for India in 2023-24 to an average of 5.5 per cent, up from the previous estimate of 5.0 per cent.

"With the sharp surge in the July CPI print, and early signs that August would see minimum relief on food prices, the upside risks to our inflation forecast have materialised," the report stated.

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Notably, retail inflation in India jumped to 7.4 per cent in July from 4.9 per cent in June. This increase could be attributed to the rise in prices of tomatoes and other vegetables across the country. In key cities, tomato prices rose significantly.

The RBI's consistent policy tightening since mid-2022 has contributed to a significant decline in inflation numbers in India. The central bank has raised the repo rate cumulatively by 250 basis points since May 2022 to combat inflation.

After the August monetary policy meeting, RBI Governor Shaktikanta Das stated that there would be a "substantial increase" in headline inflation in the near term. He emphasized the importance of aligning inflation with the target of 4.0 per cent under the flexible inflation targeting framework. (ANI)