Chennai, Sep 29: Only an unforeseen and sustained increase in inflation may compel the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) to revise upwards the repo rate, said the Chief Economist at Anand Rathi Shares and Stock Brokers.
He also added that not in the near future the MPC will reduce the repo rate from the current 6.5 per cent.
The repo rate is the rate at which the RBI lends to the commercial banks. This rate is used by the RBI as a financial instrument to control inflation.
The MPC will meet early next month.
“Unless there is an unforeseen and sustained increase in inflation, it appears that the RBI has completed its monetary policy tightening for the present cycle. Nevertheless, it should be noted that the initiation of the rate reduction phase is not anticipated to occur in the near future,” Sujan Hajra, Chief Economist & Executive Director at Anand Rathi, told IANS.
“Although it is improbable to occur during the present policy meeting, there is a possibility that the RBI might alter its policy stance regarding liquidity from a tightening approach to a neutral one, once retail inflation falls below 6 per cent,” Hajra added.