Economists see only 25bps tightening on Tuesday

Leading economists opine that the Reserve Bank will not venture to tighten the key policy tools beyond 0.25 per cent on Tuesday, considering the poor credit offtake, losing growth momentum and the emerging global situation.

Credit Policy Special | CRR Rates

The Reserve Bank will be announcing the second quarter monetary policy, which is the busy season policy, on Tuesday, November 2. And the bankers, the markets as well as the industry are resigned for a 0.25 per cent spike in short-term lending or repo rat e and borrowing reverse repo rate.

So far this year, RBI has spiked these rates as much as 1.25 per cent in five consecutive installments and one hike in the banks’ mandatory cash reserves or cash reserve ratio (CRR).

As recent as on September 16, it had increased the repo and reverse repo rates by 0.25 and 0.50 per cent to six and five per cent respectively to tame inflation, while left the CRR, bank rate unchanged at six per cent each and the statutory liquidity rat io too at 25 per cent.

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While the central bank’s prime concern is to batten down the stubbornly high inflation pressures, these economists argue that RBI will not be oblivious of the three key main issues before it - the ebbing growth trends, poor credit offtake and the uncomfo rtably high inflation.

Headline inflation stood at 8.6 per cent in August, while food inflation is at a further elevated 13.75 per cent for the week ended October 16.