India RBI Off-Cycle Meet to Discuss Inflation Letter: Survey
RBI has time till Nov. 12 to file its report and lay a roadmap for returning inflation to target.
(Bloomberg) -- India’s rate setters this Thursday will likely discuss the contents of a letter that the central bank is required to send to the government after it failed to meet its inflation target, according to a Bloomberg survey.
Fourteen out of 16 economists expect the Reserve Bank of India’s monetary policy committee to take stock of the reasons for missing its core mandate and list out remedial measures in its unprecedented off-cycle meeting, while two predicted a hike in benchmark interest rates.
“No rate action is likely at this one-day meeting,” said Sonal Varma, an economist with Nomura Holdings Inc. The next scheduled monetary review is from Dec. 5-7 and that is when we will see a rate action, she added.
Consumer prices have risen beyond the RBI’s 2%-6% tolerance band for nine straight months, triggering the failure clause for the first time since the MPC came into being in 2016. The central bank now has time till November 12 to file its report and lay a roadmap for returning inflation to target.
The meeting, however, will be happening hours after the US Federal Reserve’s policy decision where at least a 75 basis-point rate hike is expected, causing some nervousness in the markets.
“There will always be some expectation regarding possible rate action in the meeting especially given that it will be immediately after the Fed policy,” said Suvodeep Rakshit, an economist with Kotak Securities Ltd. “However, we believe any off-cycle or emergency rate hike will not be announced publicly in advance.”
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