NEW DELHI: Given the current economic scenario, the Reserve Bank of India (RBI) is likely to keep benchmark policy interest rates unchanged during the current fiscal year up to March 2022, according to a report from global financial consultancy Fitch Solutions.
“As such, we at Fitch Solutions have revised our forecast for the RBI to keep its policy repurchase (repo) rate on hold at 4 per cent over the course of FY22 (April 2021 March 2022), from our view of a 25 basis point cut previously,” it said in its note. The agency made particular note of the central bank’s plans to buy Rs 1 lakh crore of government bonds.
“We had initially expected another policy rate cut to arrest the rise in government bond yields since the Union Budget announcement in February. However, having an explicit bond purchase guidance from the RBI following the announcement of the G-SAP will also achieve a similar effect, if not even be more effective than a rate cut on capping the increase in bond yields,” it said.
The RBI had held its policy repurchase (repo) rate unchanged at 4 per cent during its latest monetary policy meeting held on April 7. The monetary policy committee (MPC) also maintained its stance to keep monetary policy accommodative for as long as necessary to sustain growth on a durable basis.
In addition, it had announced a secondary market government securities acquisition programme (G-SAP 1.0), committing to buy up to Rs 1 lakh crore worth of government bonds in the first quarter of the current fiscal year.
Inflation forecast revised upward for FY22
Fitch Solutions also revised its inflation rate forecast to an average of 5 per cent in FY22, up from 4.6 per cent previously, due to elevated inflationary pressures. The elevated inflation forecasts only “underscores our expectation for the RBI to keep its policy rate on hold”, it pointed out in its research note