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RBI Monetary Policy Outcome On June 4: Experts Expect It To Be A No-Change Policy

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For the fiscal year 2021-22, the RBI's second bi-monthly monetary policy meet is scheduled from June 2 until June 4. Amid uncertainty due to the second Covid wave and lingering concerns around inflation, the monetary policy committee is likely to maintain status quo. For the five consecutive MPC announcements, the committee has largely retained the key policy rates.

 

 RBI Monetary Policy Outcome On June 4: Experts See It To Be A No-Change Policy

So, the repo rate or the rate at which RBI lends money to commercial banks in the country will probably remain intact at 4 percent, while reverse repo will be at 3.35%, which is the RBI's borrowing rate.

In its latest annual report, RBI highlighted that monetary policy decisions for 2021-22 will get a direction from "evolving macroeconomic conditions" till durable growth is achieved "while ensuring that inflation remains within target". Further as per the RBI's take on the inflation front, CPI inflation will be subject to upward and downward pressure, nonetheless food inflation shall be guided by the monsoon situation in the country.

Also, the RBI report specified that the RBI would work on to maintain easy system-level liquidity during the year in sync with its monetary policy stance while at the same time maintaining financial stability and also overseeing that transmission do not see any hindrance.

Experts view on June 2021 RBI Monetary Policy outcome

Pre-RBI Monetary Policy view by Mr. Sandeep Bagla, CEO, TRUST AMC : "In the upcoming Credit policy, RBI has a tough task at hand, navigating between galloping commodity prices, which raise inflationary expectations - and the unpredictable impact of the lockdowns on employment, production and general welfare in the real economy.
Easy liquidity conditions and low policy rates have not led to widespread growth in credit offtake which is languishing at multi year lows.

In case of uncertain economic outlook, a central banker is likely to err on the side of caution by continued easy liquidity and policy rates lower than normal to simulate the economy.

 

It is expected to be a no change policy, with continued economy friendly soft interest rate bias. The market should continue to have faith in RBI's ability to contain inflation credibly for the policy to succeed".

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