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Below Quote On Pre RBI policy expectation view By Ms Palka Arora Chopra, Director, Master Capital Services Ltd

In the forthcoming monetary policy meeting, RBI is likely to retain interest rates at the current level for the third consecutive time. This is due to the recent decline in the inflation rate, which has fallen below 5%. However, it is anticipated that RBI might employ preventive measures in the next meeting, but there is no fundamental reason to consider a repo rate hike.

According to Consumer Price Index (CPI), India’s retail inflation skyrocketed to a three-month high of 4.81% in June. Even though it presently remains within RBI’s acceptable range i.e., below 6% but its impact can be seen on the prices of vegetables and pulses which have surged sharply. Consequently, the upside risks in inflation will remain intact in the near future and it wouldn’t be wrong to expect a surge in inflation over the next two months.

Also, incessant and uneven rainfall in a few regions may impact the supply chain negatively. But, it will not be a major concern in the text for two quarters which is a relief.

RBI’s decision to lower the interest rate depends mainly on the inflation rate and Fed’s interest rate. If growth falls below 5.5% and the Fed lowers its interest rates then only we can expect RBI to reduce the repo rate.

Also, an improvement has been witnessed in liquidity post the withdrawal of Rs 2000 notes. Thus we anticipate RBI will retain the current stance on the withdrawal of accommodation. RBI's attitude will remain cautious and will take further cues from Increase in Fed rates

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