The Reserve Bank is expected to maintain the repo rate

Mumbai, Ta. 30 November 2020, Monday

The Reserve Bank of India (RBI) is likely to keep the repo rate unchanged at this week's review meeting in view of high retail inflation. The monetary policy review meeting of the RBI's Monetary Policy Committee (MPC) is set to begin on December 2.

Retail inflation is higher than the RBI's target level. With the country's economic growth negative in the September quarter, the Reserve Bank of India (RBI) is expected to continue its accommodative stance and opt for further cuts in interest rates.

The repo rate is expected to remain at 5 per cent in the policy to be unveiled on December 8. Retail inflation is expected to average around 5 per cent in the current financial year and is unlikely to fall below 5 per cent before March, an analyst said.

The country's GDP recovered sharply in the September quarter to a negative 2.50 per cent after a historic decline of 3 per cent in the June quarter. Despite these improvements, the pace of growth is very slow.

Interest rates have also plummeted due to liquidity in the money market, which the Reserve Bank may try to stabilize, another analyst said.

At a meeting in October, the MPC maintained interest rates to help bring inflation down. The Reserve Bank has set a medium-term inflation target of 2 per cent, down 2 per cent.