The Reserve Bank of India (RBI) on July 21 said that the rate setting Monetary Policy Committee’s (MPC) meeting next month is rescheduled due to “administrative exigencies.”
The MPC will now meet on August 3-5, from previously scheduled August 2-4, said the RBI.
The MPC, which raised the repo rate by 90 basis points (bps) in May and June, is likely to announce a further hike in the next meeting. One bps equals one-hundredth of a percentage point. The repo rate currently stands at 4.90 percent.
The MPC is grappling with high price pressures in the economy and is walking a tightrope in terms of managing growth-inflation dynamics.
India's headline retail inflation rate, as measured by the Consumer Price Index (CPI), stayed largely unchanged at a high of 7.01 percent in June as against 7.04 percent in May.
At 7.01 percent, the June CPI inflation print takes average inflation for April-June to 7.3 percent, 20 basis points lower than the RBI’s forecast of 7.5 percent. However, undershooting the forecast is of little significance at this stage, with the central bank on track to miss its mandate.
The MPC is deemed to have failed when average CPI inflation is outside the 2-6 percent tolerance band for three consecutive quarters. With inflation having already averaged 6.3 percent in January-March, the RBI is now only one quarter away from failure.
Another important factor for the MPC to track at its next meeting is how the US Federal Reserve’s monetary policy will shape up. The Fed meets on July 26-27 and is expected to hike rates by 75 bps at this month’s meeting to quell soaring price pressures.
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