RBI to announce its monetary policy today; rate cuts unlikely

It will release its sixth bi-monthly Monetary Policy Statement for 2019-20. The resolution of the MPC will be placed on the website at 11.45 AM on February 6, 2020.

RBI to announce its monetary policy today; rate cuts unlikely

NEW DELHI: The six-member monetary policy committee of the Reserve Bank of India (RBI) will announce its decision whether it will cut or keep the benchmark lending rates unchanged on Thursday. The RBI committee which is led by Governor Shaktikanta announces its decision on a bi-monthly basis.

RBI monetary policy committee began its three-day brainstorming meeting on Tuesday in the backdrop of Union Budget projecting a widening of fiscal deficit amid a slowing economy and hardening inflation. It will release its sixth bi-monthly Monetary Policy Statement for 2019-20 today. The resolution of the MPC will be placed on the website at 11.45 AM on February 6, 2020.

The committee has been tasked by the government to tame retail inflation based on Consumer Price Index (CPI) at 4 per cent (+,- 2 per cent).

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The retail inflation that for several months remained in the comfort zone of the central bank has started inching up and crossed the 7 per cent mark during December 2019, mainly due to spiralling prices of vegetables.

In view of that, there are grim chances of RBI announcing any major cuts in the lending rates. Experts say the MPC members are going to have a tough time as slowing economy makes the case for reduction in repo rate difficult while rising inflation and higher fiscal deficit will require the central bank to either hike the rate or maintain a status quo.

Monetary policy is the macroeconomic policy laid down by the RBI, which constitutes the management of money supply and interest rates. The central bank tweaks interest rates to achieve macroeconomic objectives such as liquidity, consumption, and inflation.