Amid the epidemic, the Reserve Bank's MPC meeting starting today has been canceled

Mumbai, Ta. 28 September 2020, Monday

The Reserve Bank of India's Monetary Policy Committee (MPC) today announced the abrupt cancellation of its bi-monthly monetary policy review meeting starting tomorrow. No reason was given by the RBI for canceling the meeting. The new date will be announced soon, the Reserve Bank said in a list.

MPC members have not been appointed by the government. This is believed to have forced the meeting to be adjourned. The MPC had earlier held a meeting via video conferencing in August.

It is likely that the MPC will keep the interest rate unchanged at the next meeting. No change in interest rates will be made in view of high inflation. Inflation is currently high due to supply issues. At its August meeting, the RBI kept interest rates unchanged. Retail inflation in the country has been hovering above 5 per cent, well above the Reserve Bank's target of between 6 and 7 per cent.

The RBI has cut the repo rate by 114 basis points since February this year. In view of high inflation, the MPC should maintain the repo rate and also maintain an accommodative trend, as recommended by the Confederation of Indian Industry (CII). Growth is also important but in the current epidemic, the Reserve Bank has been waiting until inflation goes down.

There is scope for interest rate cuts but that is not likely to happen at present. This may be seen in the February 2021 meeting, said a banker. Grain production is also expected to reach record lows in the current year, which could lead to lower inflation in December. Retail inflation stood at 7.5 per cent in August. The repo rate is currently 3%.

In states like Maharashtra, the rate of stamp duty has been reduced and further reduction in interest rates in view of offers being offered by developers could accelerate the recovery in demand in the real estate sector, said a developer.