New Delhi:The Reserve Bank of India is expected to keep key policy rates unchanged in the remaining 2018-19 fiscal as inflation may stay ‘benign’ in the range of 3 to 4.4 per cent, says a report.
According to the report by Kotak Economic Research, the focus of the Monetary Policy Committee (MPC) remains purely on inflation print, which is expected to remain benign ( 3-4.4 per cent) in the second half of 2018-19.
“We thus see limited scope for rate hikes in the rest of 2018-19,” the report added.
In the policy review meet earlier this month, majority of RBI’s six-member MPC, including Governor Urjit R Patel, favoured to keep the key repo rate unchanged as part of “calibrated tightening” to keep retail inflation at 4 per cent.
“The minutes reaffirmed our view post the October policy and the September CPI inflation print, that the RBI will possibly stay on hold for the rest of 2018-19,” the report said.
It however added that upside risks to inflation still exist owing to pass-through of MSPs, elevated crude oil prices, volatility in global financial markets, hardening of input prices amid rupee weakness and staggered impact of HRA increases by states and its second-round impact.
“However, the seemingly structurally benign food inflation along with softening growth should help in capping the upside pressures, thereby providing RBI the comfort of staying on pause mode in the foreseeable future,” it said.
During its October monetary policy review, RBI kept the key repo rate unchanged at 6.50 per cent.