RBI to maintain status quo

New Delhi, April 1: The RBI is likely to keep interest rates unchanged in its first bi- monthly monetary policy review for 2018- 19 to be unveiled this week as hardening global crude oil prices continue to pose a risk to domestic inflation.

This would also be the first monetary policy announcement after the Budget, which has slightly deviated from the fiscal consolidation plan.

The six- member Monetary Policy Committee is to meet on April 4 and 5.

Pressure has been mounting on the RBI to cut interest rates in the wake of declining retail inflation and the need to fuel growth momentum.

However, the Reserve Bank of India will have to do a tightrope walk as globally interest rates are inching upwards.

Last month, the US Federal Reserve raised interest rates by a quarter of a percentage point and signalled that it is on track to raise rates twice more in 2018.

Besides, the Reserve Bank has to take into consideration the rise in crude oil prices which temporarily touched $ 70 per barrel.

“We expect the MPC to keep policy rates on hold and maintain its neutral stance,” analysts at American brokerage Morgan Stanley said.

Bank of America Merill Lynch also echoed the view, but added that it expects a rate cut in the August review if monsoons are favourable.

“We expect the RBI MPC to strike a balanced tone on April 5, with March quarter inflation set to average 4.6 per cent, 0.50 per cent below their 5.1 per cent forecast,” it said. Assocham.

The rate of inflation based on WPI Food Index consisting of ‘ Food Articles’ from Primary Articles group and ‘ Food Product’ from manufactured products group decreased from 1.65 per cent in January, 2018 to 0.07 per cent in February, 2018, it added.