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Monday, March 31, 2014

RBI’s monetary policy tomorrow likely to be neutral: Sachin Karpe

The Reserve Bank will come out with its third quarter review of monetary policy tomorrow. Reserve Bank of India's monetary policy review will be a decisive factor for markets this week. Analysts are widely expecting the apex bank will keep interest rates on hold. RBI has indicated earlier that its priority would be to rein in inflation, although India Inc has been pushing for cut in interest rates as a booster dose for economic growth. RBI in January raised the key repo rate by 0.25 per cent to 8 per cent says market analyst Sachin Karpe

Tremendous pressure on the exports was observed as there was inflow of foreign currency and strengthening of the rupee against dollar. According to MD Shyam Srinivasan of Federal Bank, RBI may go in for a pause this time. Punjab National Bank’s chairman and managing director K R Kamath says the RBI action will depend on an outlook on inflation. According to Morgan Stanley volatility in food prices might result in CPI inflation. The present economic situation may not warrant any rate hike says SBI’s economic research team. Last December, RBI pressed the pause button on its monetary tightening measures and said it might go for rate cuts in the future depending on moderation in inflation. Mr. Sachin Karpe says RBI has gone public on targeting CPI-based inflation down to 8 per cent by January 2015 and further down to 6 per cent by January 2016, as per the recommendations of the Patel committee. Observing neutral sentiments and given the country’s economy, Sachin Karpe also feels that RBI may just maintain a status quo.


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