Fiscal Fears: RBI to maintain rates, accommodative stance (IANS Poll)

By Rohit Vaid New Delhi/Mumbai, Feb 4 : High fiscal deficit levels along with fears of fanning inflations will deter the Reserve Bank of India (RBI) from administering a dose of lending rate cut during the last monetary policy review of FY21.
In a poll conducted by IANS, economists and industry experts cited limited headroom for further monetary policy easing along with a wait of full transmission of past rate cuts as a key determinant for a pause in policy easing.
However, a growth-boosting accommodative stance is expected to be maintained.
“Despite the fall in retail inflation, the monetary policy committee (MPC) is expected to maintain the current lending rates,” Sunil Kumar Sinha, Principal Economist, India Ratings & Research, told IANS.
“The MPC has limited head-room for cutting rates and may like to retain the firepower for exigencies. On the other hand, the accommodative stance will continue, since the growth needs support and transmission of the past rate cuts is still playing out.” A policy easing, if administered, would have theoretically allowed commercial banks to reduce their lending rates, thereby helping both consumers and the industry get cheaper finance.