INSTANT VIEW-India's central bank keeps rates steady

BENGALURU, Aug 6 (Reuters) – India’s central bank kept interest rates on hold on Thursday, amid a recent rise in retail consumer prices and said it would ensure inflation remains within target going forward.

The repo rate currently stands at 4.0% and the reverse repo rate at 3.35%.

Two-thirds of analysts in a Reuters poll had predicted a 25 basis point cut in the repo rate, while the rest saw no change.

COMMENTARY KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU “The Monetary Policy Committee (MPC) was unanimous with the decision to hold rate unchanged at 4%. Expectedly, the accommodation stance is retained as well, as the economy is showing signs of weakness despite exiting from the lockdown.”

“As we have been saying, surging inflation will flatten the recovery curve, the Reserve Bank of India (RBI) governor too stated that “surge in COVID-19 cases has subdued early signs of revival.”

“He also endorsed our view of supply chain disruption impacting inflation. Not surprisingly, the central decided to wait for inflation to cool before taking further action to boost a fragile economy. Like us they expect inflation to cool off during 2HFY21 which raises a probability of a rate cut during 4Q20.”

UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI “MPC’s caution on uncertainty on inflation trajectory suggests that chances of further easing will henceforth remain a function of the evolution of supply-side shocks. We see the next few readings still elevated near 6% and hence we do not see any rate easing in at least the October meeting.”

“On a positive note, the other regulatory and development measures announced today will go a long way in ensuring financial stability.”

Source: Read Full Article