The Reserve Bank of India is likely to go for a status quo in policy rates at next week’s monetary policy review on a cool-off in inflation, analysts said today.
“We expect the monetary policy committee to keep policy rates on hold and maintain its neutral stance,” analysts at American brokerage Morgan Stanley said in a note.
Its rival Bank of America Merrill Lynch also seemed to be echoing the same view, but added that it expects a rate cut in the August review if the monsoons are favourable. “We expect the RBI MPC to strike a balanced tone on April 5, with March quarter inflation set to average 4.6 percent, 0.50 percent below their 5.1 percent forecast,” it said in a note today.
After surging to a concerning 5.2 percent in December, the headline inflation cooled-off to 4.4 percent for February and is expected to go down further.
A meeting of the rate setting panel, the monetary policy committee, will begin on April 4, and the resolution will be announced the next day. Governor Urjit Patel will also be holding the customary post-policy interaction with journalists, which will be the first such conference after the nearly Rs 13,000-crore Punjab National Bank scam came to light.
Analysts at Morgan Stanley said the six-member MPC will vote in the same pattern as last policy review, of 5:1 in favour of status quo, with Dr Michael Patra being the only one who would vote for a 0.25 percent hike in rates.
BofAML analysts said inflation may be higher for the June quarter, but added that the RBI will see through the print because of the lower base in the year-ago period.
On the growth front, they said the RBI may indicate that the recovery is at an early stage and hence, there may be a case for continuing with the neutral stance.