{"id":73656,"date":"2018-04-20T09:23:54","date_gmt":"2018-04-20T09:23:54","guid":{"rendered":"http:\/\/www.bnreport.com\/mpc-signals-shift-to-hawkish-stance-rates-could-rise-soon\/"},"modified":"2018-04-20T09:23:54","modified_gmt":"2018-04-20T09:23:54","slug":"mpc-signals-shift-to-hawkish-stance-rates-could-rise-soon","status":"publish","type":"post","link":"https:\/\/www.bnreport.com\/en\/mpc-signals-shift-to-hawkish-stance-rates-could-rise-soon\/","title":{"rendered":"MPC signals shift to hawkish stance, rates could rise soon"},"content":{"rendered":"

MUMBAI: An increase in interest rates might just be round the corner, going by the minutes of the Monetary Policy Committee (MPC) released on Thursday. The common concern is the impact on inflation<\/a> of the proposed increase in minimum support prices, the fiscal situation, and the delayed impact of house rent allowances mandated by the pay panel. <\/p>\n

Furthermore, all members of the committee acknowledge some revival in economic activity, which potentially could enhance inflationary pressures. <\/p>\n

In his justification for a pause in policy rates, Reserve Bank of India<\/a> (RBI<\/a>) Deputy Governor Viral Acharya indicated that in his next policy review, he might shift the neutral liquidity<\/a> stance toward withdrawal of accommodation, suggesting a likely directional change. <\/p>\n

Acharya stressed the need to separate \u201csignal\u201d from \u201cnoise\u201d in the data, suggesting that the recent softening in inflation is largely due to lower vegetable prices, which in turn have been volatile and seasonal. <\/p>\n

\u201cThis volatility is largely noise from an interest-rate setting perspective; this volatility is also not something amenable to monetary policy actions,\u201d Acharya said in his minutes. <\/p>\n

The RBI panel, in its April policy meeting, had voted for a pause in the repo rate<\/a>, which was kept unchanged at 6 per cent. It forecast higher growth for FY19 at 7.4 per cent from 6.6 per cent in FY18 amid the broader commitment to achieving the medium-term target for headline inflation of 4 per cent on a durable basis. <\/p>\n

Economists, too, are factoring in a rate increase by the central bank. \u201cThe minutes of the MPC meeting have a distinctly hawkish tinge as compared to our reading of the statement itself,\u201d said Aditi Nayar, principal economist at ratings firm Icra. \u201cWhile incoming data and policy decisions related to factors such as MSPs, excise on fuels and expenditure announcements remain critical, todays minutes suggest that a back-ended rate increase in 2018 remains a possibility \u2014 if headline inflation exceeds the trajectory set out by the MPC.\u201d <\/p>\n

Bond yields, therefore, could harden in the short run. <\/p>\n

Should the food situation turn adverse or overwhelm food management strategies, \u201cwe will have to deal with inflation testing the upper tolerance limit of the inflation band,\u201d said internal member of the MPC, Michael Patra, who was the lone dissenter in his vote during the recent meeting on April 6. He had voted in favour of a 25-basis-point increase in key policy rates. <\/p>\n

Governor Urjit Patel has also been cautious in his assessment of inflation, which despite recent moderation faces several upside risks. \u201cHence, I would like to wait for more data and watch how various risks to inflation evolve, going forward,\u201d he said in the minutes. <\/p>\n

<\/a><\/strong> <\/a><\/p>\n

Original Article<\/a><\/p>\n

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MUMBAI: An increase in interest rates might just be round th..<\/p>\n","protected":false},"author":1,"featured_media":73657,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[202],"tags":[],"class_list":["post-73656","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"\nMPC signals shift to hawkish stance, rates could rise soon - Business News Report<\/title>\n<meta name=\"description\" content=\"MUMBAI: An increase in interest rates might just be round th..\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bnreport.com\/en\/mpc-signals-shift-to-hawkish-stance-rates-could-rise-soon\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"MPC signals shift to hawkish stance, rates could rise soon - 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