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‘RBI to adopt wait and watch approach’

The monetary policy review on October 4 will be the first by the six-member MPC and Governor Urjit Patel

Policy Pulse
Publish Date: Oct 2 2016 4:20PM | Updated Date: Oct 2 2016 4:20PM

‘RBI to adopt wait and watch approach’

The newly-constituted Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel is unlikely to lower rates at its maiden policy review on Tuesday.

 

Monetary policy review on October 4 will be the first by the six-member MPC as well as Governor Patel. Currently RBI awaits more supporting data on inflation, experts said.

 

“I don’t think the Reserve Bank is going to change rates as inflation — both WPI and CPI — have not softened much,” Bank of Maharashtra Managing Director and Chief Executive R P Marathe said. 

 

August retail inflation eased to a five-month low of 5.05 per cent but WPI inflation climbed to a two-year high of 3.74 per cent.

 

Before the dip in August, both the retail as well as wholesale price indices were on a continuous upward spiral.

 

The government had in August notified 4 per cent inflation target with a range of plus/minus 2 per cent for the next five years.

 

“RBI is unlikely to cut rate this time,” Union Bank of India Chairman and Managing Director Arun Tiwari said.

 

On his policy expectations from the new Governor, Tiwari said Patel may announce “some more measures related to resolution of non-performing assets”.

 

If the six-member panel is divided on rate decision, the Governor can use his veto power to take a final call on the policy rates.