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Demonetisation Effect: Monetary Policy Committee meeting starts Tuesday

Demonetisation Effect: Monetary Policy Committee meeting starts Tuesday

In order to tackle the effect of demonetisation move by the central government, Monetary Policy Committee (MPC) will begin its conference on Tuesday among expectations of at least 0.25 percent policy rate cut.

In its last outing, six-member MPC dropped the short term lending rate by 0.25 % to 6.25 percent.

It will be the second meet of the MPC chaired by the Reserve Bank of India Governor Urjit Patel.

RBI has reduced repo rate by 1.75 % since January 2015.

Very difficult to forecast now because the monetary policy committee now decides. Maybe, like 25-50-basis point cut is what everybody is awaiting and no rate cut will be a bigger surprise, SBI Managing Director Rajnish Kumar said.

Canara Bank MD and CEO Rakesh Sharma said that with softening of inflation, we expect that RBI may go for a 25-basis point rate cut in the next policy.

According to Bandhan Bank Managing Director Chandra Shekhar Ghosh, there is expectation of a 0.25 % cut in repo rate as the October inflation has shown decline and the demonetisation drive is further expected to lower inflation in November.

Within October, retail inflation stood at 4.20 % while wholesale inflation eased to 3.39 per cent.

“0.50 per cent cut is not feasible this time around as there are still uncertainties surrounding US Fed rate hike,” Ghosh added.

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