RBI expected to maintain rates on elevated inflation levels: Brickwork Ratings

New Delhi, Dec 2 : The Reserve Bank of India (RBI) is expected to maintain a rate pause in the upcoming Monetary Policy Committee meet, considering elevated inflation levels, Brickwork Ratings said on Wednesday.
As per the agency, to support economic activity, which was severely disrupted since March, the RBI is likely to continue with its accommodative stance; however, it is unlikely to reduce the repo rate in the December policy meeting, considering CPI inflation remains elevated.
Lately, CPI inflation has remained above the RBI MPC’s median target of 4 per cent for the last 13 months and in October 2020, the inflation rate touched 7.61 per cent, the highest since May 2014, largely due to the high rate of food inflation.
“Price pressures are likely to be transient and are expected to ease gradually in the coming months if the economy normalises,” the agency said.
“However, the current level of CPI inflation is uncomfortably higher than the MPC’s upper bound of 6 per cent while demand conditions in the economy continue to remain tepid and real interest rates are mostly in the negative zone.” Since March 2020, the RBI has reduced the repo rate by 115 points cumulatively and brought it down to 4 per cent in the May policy meeting.