Reserve Bank of India (RBI) governor Shaktikanta Das will release the first by-monthly monetary policy statement of fiscal 2022 in a press conference on Wednesday. The statement was prepared by the six-member Monetary Policy Committee (MPC), or the rate-setting panel, headed by Das after three-day marathon meeting could shed light on the following points.
Rate Action & Commentary
A change in policy rates is unlikely to happen but a hike is expected at the end of the current fiscal or the next. Most bankers and economists also want the RBI to support the recovery that has just begun by maintaining the present rates.
The MPC is unlikely to revise down its FY22 forecast of 105% amid localized lockdowns due to fresh wave of pandemic. But RBI could revise its Q1FY22 forecast of 26.2%. Lead indicators also point to mid sequential moderation in RBI policies.
Rising input costs, commodity prices, and sticky core inflation could press RBI to revise its inflation forecast for the Q2FY22. The central bank projected inflation at 5.2-5% in Q1FY22 and 4.3% in the second half in its February policy. According to Madhavi Arora, economist, Emkay Global, there could be little tinkering with inflation forecasts.
While the experts are divided into liquid normalization process of RBI, but there are strong chances that the central bank could start liquidity normalization in the second half of the fiscal. But Sonal Varma and Aurodeep Nandi, economists, Nomura believe that RBI could start the process in mid-2021.