The Reserve Bank of India is expected to hold the benchmark interest rate unchanged in its next monetary policy meeting. Some analysts also expect the RBI to provide its first economic guidance since February. Economists polled by Reuters projected that the central bank would likely keep the rate unchanged at 4.0%, with the rate expected to remain around that level until the end of 2021.
The RBI’s monetary policy review was scheduled for September 29 - October 1. However, the meeting was delayed to a date that is yet to be announced. The central bank has cut rates by 115 bps this year to cushion shock caused by the COVID-19 pandemic. In the last quarter, India’s economy plunged 23.9%, the weakest performance on record. The RBI now has to manage accommodative policy amid high retail inflation.
India has gradually opened its economy from coronavirus lockdowns, but it led to a spike in infection cases which put economic activity remain depressed. The health crisis has left millions of Indians jobless, and the country is bracing for the first economic downturn this year, the first since 1979. Unprecedented uncertainty has been preventing the central bank from providing its economic forecasts, which it typically issues every six months.
In August, inflation reached 6.69%. Inflation has been above the central bank’s 2-6% target in the last five months. The RBI has maintained a view that inflation will come down, providing the central bank with room to ease policy to rev up the virus-hit economy.
