New Delhi: The Reserve Bank of India (RBI) on Wednesday will announce its decisions on the rate cuts after its Monetary Policy Committee (MPC) meeting, which will be the first after Union Budget 2018-19.
The apex bank is expected to target key concerns such as high global crude prices, inflation, rising bond yields, and the government’s revised fiscal targets.
According to Moneycontrol, in the last few months, RBI has been gradually nudging up its inflation forecast. While keeping the medium-term target for consumer price index (CPI) inflation of four percent within a band of +/- two percent, the apex bank had raised the near-term forecast of inflation to 4.3 – 4.7 percent for the second half of FY18.
And owing to the low base, Consumer Price Inflation (CPI) rose to 5.21 percent in December, thereby crossing the expected zone.
The central bank will thus be keeping an eye on how the fading impact of the government’s House Rent Allowance (HRA) component along with pass-through of a fall in Goods and Services Tax (GST) rates impacts inflation in the coming months.
The six-member MPC, headed by RBI Governor Urijit Patel met for the sixth bi-monthly Monetary Policy Statement for 2017-18 on Tuesday.
The bank is also worried about high global crude prices.
Though RBI has held the rates steady since a 25 basis point cut in August 2017, the prospects of rate hike have increased, as annual inflation accelerated to 5.21 percent in December 2017.
Earlier in the Union Budget, the government had proposed to buy agricultural produce at 1.5 times the cost of production, marking a major policy shift after keeping the average Minimum Support Price (MSP) increase in low single digits over the past three years.
This move may change the inflation trajectory in a country where at least three in five citizens rely on farm output for a living. (ANI)