RBI to keep rates on hold due to sticky inflation: Morgan Stanley

Mumbai: Even as India gradually picks up economic pace as hope of Covid vaccine increases, the central bank is set to stay away from tampering with the rates, Morgan Stanley said in a research report today.

“We expect RBI to keep rates on hold as it continues to maintain its accommodative stance. This is on the back of a sticky inflation trend and sustained recovery across high frequency data which is in line with our expectation of positive economic growth from QE Dec,” the report said.

After the Indian economy contracted by 23.9% in the first quarter of the financial year, the biggest crash in over 40 years, the country has gradually seen some revival. In October some of the indicators showed that the growth may be back in the economy.

The inflation too remained under control, said experts.

“While headline inflation has been trailing above the upper threshold of the 2-6% range for seven consecutive months, it is expected to decelerate next year, albeit remaining marginally above the 4% target. Since the advent of the pandemic and subsequent lockdown from March onwards, the RBI has eased rates by 115bp, taking the cumulative easing since 2019 to 250bp. We believe the focus of monetary policy in the near term will be to address,” the report said.


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