RBI Monetary Policy announcements today; repo rate likely to be hiked by 25 bps

Reserve Bank of India (RBI) governor Shaktikanta Das will give out the monetary policy committee (MPC) statement today at around 10 am.  The monetary policy committee meeting lasted from February 6 to February 8.  This was the first MPC meeting after Union Finance Minister Nirmala Sitharaman presented Budget 2023 in Parliament on February 1. The central bank will likely settle for a 25 basis points (bps) repo rate hike in its monetary policy committee meeting this week, as per experts. 

The RBI raised the key benchmark interest rate or repo rate by 35 bps in December 2022 after delivering three back-to-back 50 bps hikes. The central bank has increased the short-term lending rate by 225 bps to contain inflation caused mostly due to global supply chain disruption following the Ukraine war. 

Kotak Institutional Equities said in its report that global inflation is gradually beginning to turn benign despite inflation being well above every central bank’s target. The report said, “We expect the RBI MPC to hike policy rate by 25 bps to 6.5 per cent, followed by a prolonged wait-and-watch approach, as it assesses the lagged impact of monetary tightening on growth and inflation.”

Director of Sarla Anil Modi School of Economics at NMIMS Mumbai Amita Vaidya said the MPC may ease its stance. She said, “However, the downside of the global economic outlook continues. The domestic economy is showing an uptick and resilience. Food inflation continues to have increased pressure from high cereal prices. Thus, the RBI may remain focused on the withdrawal of accommodation and raise the policy rate by 25 basis points.”

The Centre has tasked the RBI to ensure retail inflation remains at 4 per cent with a margin of 2 per cent. The central bank had failed to keep the inflation rate below 6 per cent for three consecutive quarters from January 2022. 

(With agency inputs)

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