Inflation, growth momentum suggest RBI will hit pause button: report

New Delhi: Easing inflation and the economic growth momentum suggest that the Reserve Bank will keep the repo rate unchanged at 6.25 per cent in its policy review meet next week, says a report.

According to the report by Edelweiss Securities, easing inflation and economic momentum do not suggest a need for policymakers to rush for another hike in the forthcoming review. Though core inflation has peaked, it is expected to ease over next 12 months and even as economic activity has rebounded, it has improved only vis-a-vis demonetisation/GST-led disruptions.

"We think it is too early to conclude that recovery is well entrenched. To that extent, there is hardly a case for rushing to normalise the monetary policy further," it added.

Besides, since external conditions have deteriorated, this prioritises macro stability over growth.

"In the upcoming policy review, we expect MPC to maintain its neutral stance while keeping the rates unchanged," Edelweiss Securities said in a research note.

In June, the Reserve Bank of India had upped its retail inflation projection by 0.30 per cent and kept the policy stance in the neutral zone, even as it hiked the key rate by 0.25 per cent to 6.25 per cent.

"We expect status quo on rates with neutral stance continuing as the policymakers await more economic data and monitor developments on global front. In particular, we think crude oil prices and trend in dollar will be most important to watch," it added.

The RBI's Monetary Policy Committee (MPC) will begin its three-day meeting on July 30 and announce its decision on the third bi-monthly policy of the current fiscal on August 1.