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RBI may hold rates on Dec 5 citing inflation worries: Icra

Monday, December 04, 2017

The Monetary Policy Committee, which will be meeting next week, is likely to keep repo rates unchanged at 6% on inflation concerns, says a study.

The retail inflation or consumer price index based- inflation inched up to a seven-month high of 3.58% in October from 3.28% in September.

The central bank will announce the policy review on December 6 after two days of MPC meeting beginning December 5. Rating agency Icra said although the CPI inflation for October is lower than the range of 4.2-4.6% for the second half of FY18 that the MPC had forecast in its previous review, and the recent revision in GST rates would ease price pressures, certain inflation risks persist.

"With the CPI inflation likely to track a rising trend over the second half and print at around 4.5% in March 2018, we expect an extended pause amid non-unanimous voting by the MPC in the December policy review," Icra managing director and chief executive Naresh Takkar said.

The agency said based on the expected gradual rise in currency with the public and continued working capital-led uptick in credit off-take, liquidity situation is likely to be close to neutral by mid-December 2017, with sporadic deficits anticipated around the next advance tax payment dates.

The Reserve Bank is likely to reiterate its stance of bringing systemic liquidity closer to neutrality on December 6, and primarily use overnight and term repos under the LAF to manage liquidity in the near term, he said.

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