RBI's Monetary Policy Committee (MPC) on Monday began its three-day meeting amid speculations that key interest rate may be raised for the first time after four-and-half years on account of rising prices of crude oil and high inflation.
The six-member MPC is headed by Reserve Bank of India (RBI) Governor Urjit Patel. For the first time, the meeting is being held for three days instead of the usual two days owing to administrative exigencies. The resolution of the second bi-monthly monetary policy meeting in the current fiscal 2018-19 will be announced on Wednesday afternoon.
In January 2014, RBI had last raised the short-term lending rate (repo) to 8 per cent; since then it has either reduced it or maintained status quo. The current repo rate stands at 6 per cent. The seven-quarter high GDP growth rate of 7.7 per cent in the January-March quarter of 2017-18 and forecast of a normal monsoon have reduced the clamour for a cut in the benchmark lending rate (repo).
Retail inflation, a key data for RBI, has risen above 4 per cent since November 2017. Besides, oil prices have been rising for the past few months. While petrol in Delhi costs Rs 77.96 a litre, diesel is at Rs 68.97 per litre.
The government has mandated the RBI to restrict the retail inflation at 4 per cent (with a margin of +/- 2 per cent), while supporting growth.
Several major lenders, including SBI, PNB and ICICI Bank, have pushed their lending rates from June 1. Deposit rates have also been raised by some banks.
In the April MPC meet, RBI Deputy Governor and member of the panel Viral Acharya had indicated that he would vote for withdrawal of monetary accommodation in the June policy. Another member, Michael Patra voted for a hike in repo rate but was overruled by majority that opted for status-quo.
Retail inflation rose to 4.58 per cent in April. The WPI-based inflation too rose to 3.18 per cent in April mainly on account of spiralling fuel prices. (With inputs from agencies)