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RBI Monetary Policy: Experts Say In Line With Expectations

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The RBI's Monetary Policy Committee (MPC), which recommended holding repo rates or interest rates steady is largely in line with expectations say experts.

 

The Monetary Policy Committee's view that inflation is likely to remain elevated, barring transient relief in the winter months from prices of perishables, was largely responsible for holding interest rates steady.

According to Shishir Baijal, Chairman & Managing Director, Knight Frank India today's announcement remains in line with the RBI's goal of nurturing growth despite the rise in inflation.

"RBI's accommodative stance in the last few months has kick started the economy that had experienced a sudden contraction due to the pandemic. These measures have ensured both - demand stimulation and liquidity in the economy, achieved by keeping the short term borrowing rates well below benchmark.

RBI Monetary Policy: Experts Say In Line With Expectations

Keeping demand stimulated to maintain the current momentum would be critical for continuous acceleration of the economic recovery. Recently reviving market performance indicators, despite all odds and supported by government and central bank interventions, have enthused a great sense of relief across real estate markets in the country. Home loan interest rates, which are at the lowest, have played a key role in rekindling the latent demand in housing market by nudging home buyers to make purchase decisions even during the pandemic. RBI's decision to keep the rates unchanged will keep the momentum of demand intact to provide the much needed stability, as even while there is recovery in the economy, it is still fragile and highly volatile," said Mr Baijal.

 

According to Ravi Singhal, Vice Chairman, GCL Securities, the RBI's accommodative stance to stay the repo rate unchanged is in line with what most folks within the industry were expecting.

"The governing agencies got to contain near-term financial risks within the face of rising inflation. Consumer Price Inflation has reached 6.8% in Q3 FY 20, which is an alarming sign. In Q4 although it's expected to ease bent 5.8%, it's still not a healthy number. However green shoots are visible within the overall economy substantiated by resilient rural consumption and up tick in urban demand. The Market will also boost on some relief could be seen in winter months for inflation cool down," he stated.

According to Ram Raheja - Director, S Raheja Realty, the real estate sector was expecting a rate cut which would give further impetus to demand and induce liquidity in the market.

"However, for the third time in a row the RBI decided to keep the repo rate unchanged for the growth of the economy and to have control over inflation maintaining an accommodative stance. While the GDP expectations for H1 2021 are on the downside, there is expectation of recovery in H2. With the next budget focusing on boosting growth, this may lead to rise in investment in safe-haven assets like real estate as prices are likely to appreciate from current levels. With the role of the real estate sector in generating employment and economic activity, we foresee 2021 as a year that makes a comeback along with the hopes of a vaccine," he stated.

Read more about: rbi monetary policy repo rate
Story first published: Friday, December 4, 2020, 12:31 [IST]
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