RBI likely to not change the interest rate on December 5

According to the experts,  despite the moderation in the growth of the economy and easing inflation, The Reserve Bank of  India is likely to maintain status quo on interest rate in the forthcoming review of monetary policy on December 5.  After continuous hikes since June, the interest rates were kept unchanged in the last policy review held in October by RBI further startling the market that expected a rate hike for the support of collapsing rupee and to fight against the inflationary pressure due to high oil prices. The rate at which RBI lends to the other banks known as the repo rate remained unchanged at the percentage of 6.50. The members of the Monetary Policy Committee, led by RBI Governor Urjit Patel, will have a three-day meeting starting from December 3 for the fifth bi-monthly monetary policy review of the ongoing financial year.

The decision of the Monetary Policy Committee will be notified on December 5. As the previous policy declared, the rupee has appreciated against the US dollar and reached above the psychologically crucial mark of 70.  Also, The Global crude oil prices slipped below USD 60 per barrel from USD 86 per barrel. However, the economic growth of India slowed to 7.1% in the quarter of September after it peaked over two-year high in the first three months of this fiscal, as the demand for consumption moderated and farm sector displayed signs of weakness. Though growth in Gross Domestic Product (GDP) in the period July-September is the least in the three quarters but was better than the previous year in the same period.

In the first quarter of the current fiscal year which began in the month of April, there was a growth of 8.2 percent in the Indian economy, stated in the data released by the Central Statistics Office (CSO). According to Kotak Research, MPC’s last policy estimated inflation at 3.9-4.5 percent in the second half of fiscal and percentage of 4.8 in the first quarter of next year.

The Chief Economist of India Ratings and Research (Fitch group), Devendra Kumar Pant stated that 2018-2019 can still end up with a growth in GDP of 7.3 percent and “RBI may get much-needed room to keep the policy rate unchanged in the upcoming bi-monthly policy review on December 5. As per the latest available data, the retail inflation on CPI (Consumer Price Index) declined to a one year low of 3.31% in the month of October on the back of cheaper fruits, kitchen staples and protein-rich items.  The lowest retail inflation number touched to 3.28% in September 2017 and later was recorded as 3.7% in September 2018.