MPC meet: RBI likely to shift policy stance to neutral, but avoid rate cuts

04 फरवरी 2019

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The RBI's Monetary Policy Committee is likely to change its policy stance to neutral in its meeting this week on low inflation footprint but would refrain from cutting interest rates due to fiscal challenges and rising crude oil prices, experts said.

The bimonthly meeting of the MPC is scheduled from February 5 to 7. It would be the first MPC meeting under RBI Governor Shaktikanta Das, who took charge in December 2018 following sudden exit of Urjit Patel.

Bank of Baroda Chief Economist Sameer Narang observed that the MPC may change its monetary stance to neutral on February 7 from calibrated tightening'.

Retail inflation during the October-December quarter stood at 2.6 per cent against RBI's projected trajectory of 3.8 per cent.

ALSO READ:Finance Minister Piyush Goyal to address RBI board on Feb 9

"Given the significant undershoot and now the narrative of a global slowdown, CPI inflation is expected to remain below the RBI's target of 4 per cent in 2018-19.

"This gives RBI a room to change its monetary policy stance. However, the elevated level of core components such as health, education, household and personal goods suggests that room to cut rates is limited for now," Narang said.

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