MUMBAI: The reconstituted Monetary Policy Committee’s (MPC) first meeting that began here on Monday comes in fraught times after the escalation of conflict in the Middle-East has sent crude prices skyward, completely diminishing any chance of an interest rate cut.
A rate cut possibility was seen likely after the US Fed stumped the markets with a historic 50 bps reduction in interest rates earlier last month.
Even a change in the monetary policy stance is bleak. If the MPC leaves the rates changed at 6.5%, it will be for the tenth time the panel has opted for status quo. The Reserve Bank will announce the policy decision on October 9.
On October 1, the government reconstituted MPC for the second time, appointing Prof Ram Singh, a director with the Delhi School of Economics; economist Saugata Bhattacharya; and Dr Nagesh Kumar, the chief executive at the Institute for Studies in Industrial Development, New Delhi, as the external members, replacing Ashima Goyal, Shashank Bhide and Jayanth Varma.
All the outgoing three external members — Goyal, Bhide and Varma — were continuously voting for rate cuts in the past four MPC meetings, while three ex-officio members from the RBI — governor Shaktikanta Das and the deputy governor Michael Patra and Rajiv Ranjan, an executive director—were voting against any such moves citing the still sticky inflation led by spiraling food prices.
While the September 17 historic rate cut by the US Fed spawned a flicker of hope back home that the RBI would at least tone down its strident policy stance, what happened in Israel last Tuesday night has completely put that little flicker out given the scale of escalation in the world’s most volatile region that’s also is the fuel capital of the world.
Immediately the way crude prices jumped over 5 percent hand since then risen by over $9 a barrel and is headed to $80 a barrel range now. And many analysts are expecting the oil to touch $90 soon.
New MPC panel to decide on policy rates
On Oct 1, govt reconstituted MPC for second time, appointing Prof Ram Singh, director with the Delhi School of Economics; economist Saugata Bhattacharya; and Dr Nagesh Kumar, chief executive at the Institute for Studies in Industrial Development, New Delhi, as external members, replacing Ashima Goyal, Shashank Bhide, Jayanth Varma.
