Will RBI maintain rates and its accommodative stance? All eyes on MPC decision today
New Delhi | Jagran Business Desk: The Reserve Bank of India (RBI) will hold its much-awaited monetary policy committee (MPC) meeting on Friday. This will be the first MPC meet that will be held by the central bank after Finance Minister Nirmala Sitharaman announced Union Budget 2021.
The MPC meet is crucial as the Centre has proposed to borrow Rs 80,000 crore this fiscal and Rs 12 trillion for the next one in the Union Budget 2021.
While the market is expecting that RBI will lay down its plan for normalising liquidity over government's 'oversized' borrowing programme, economists and experts have suggested that the central bank will maintain its growth-boosting accommodative stance despite the fall in retail inflation.
"The MPC has limited head-room for cutting rates and may like to retain the firepower for exigencies. On the other hand, the accommodative stance will continue, since the growth needs support and transmission of the past rate cuts is still playing out," said Sunil Kumar Sinha, Principal Economist, India Ratings and Research, while speaking to news agency IANS.
Notably, retail inflation fell to 4.59 per cent in December last year. Later, the central bank announced that the key repo rate will remain unchanged at 4 per cent while the Marginal Standing Facility (MSF) rate was kept at 4.25 per cent.
In January, the RBI announced that it will restore normal liquidity management operations in a "phased manner" by conducting a Variable Rate Reverse Repo auction.
"As stated in the last MPC (Monetary Policy Committee) statement on December 4, 2020, it is reiterated that the Reserve Bank will ensure availability of ample liquidity in the system," the RBI said in a statement.
Following the outbreak of coronavirus pandemic, the RBI had decided to truncate trading hours for various market segments with effect from April 07, 2020. However, with things returning to normal, the central bank decided to restore trading hours for markets regulated by it in a phased manner from November 9, 2020.
Posted By: Aalok Sensharma