RBI MPC decision today: What to expect
The Reserve Bank of India (RBI) will be coming out with its monetary policy on Friday.
The Reserve Bank of India (RBI) will be coming out with its monetary policy on Friday. Here's a look at some of the key expectations.
The context
In Budget 2021, the government announced a larger-than-expected borrowing programme, which jumps sharply for February and March and for FY22 it is Rs 12 lakh crore versus an expected Rs 10 lakh crore.
The Monetary Policy Committee (MPC) in the last policy had indicated the need to pull up rates above the reverse repo rate. So, the RBI had announced liquidity of Rs 2 lakh crore via reverse repo auction.
Inflation mandate
High liquidity can push up inflation. However, RBI's inflation forecast is seen higher than actuals. For Q3, it was lower than expected and for Q4, CPI may be 4.8 percent versus RBI's forecast of 5.8 percent. So, this gives some elbow room to help the government borrowing programme.
What to watch
RBI may not cut rates in 2021. It is expected to retain the accommodative stance in 2021. However, the liquidity language is important. Another factor to look out for is whether RBI will restore CRR to 4 percent from 3 percent on March 31 and whether higher liquidity would bother RBI's inflation outlook.
CNBC-TV18's Latha Venkatesh gives more details on what to expect from RBI's MPC to be held tomorrow.
To know more, watch the video.
(Edited by : Jerome Anthony)
First Published: Feb 4, 2021 1:50 PM IST
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