The Reserve Bank of India’s Monetary Policy Committee meeting announcements will be made today. The five-member MPC committee led by Shaktikanta Das started the deliberations on December 6. The committee is expected to maintain status quo on repo rates as well as the GDP growth forecast amid the uncertainty around the Omicron variant. The MPC had kept benchmark policy unchanged in the last meeting.
Most financial advisers believe that RBI is likely to retain the repo rate, and hike it up in February. "We maintain our call for a reverse repo rate hike in February with the December meeting remaining a close call. We expect the RBI to continue on its path of normalisation with the reverse repo rate hike in February policy and repo rate hike in mid-2022-23," a Kotak Economic Research report said.
"We were previously expecting the RBI to hike the reverse repo rate 15-20 bps in December, but given the uncertainty emerging from the new COVID-19 variant, we now expect status quo," Morgan Stanley economists stated to Reuters.
A Reuters poll involving 50 economists conducted between December 1-3 showed that the RBI would hold its benchmark interest rate at 4.00 per cent and the reverse repo rate at 3.35 per cent this meeting.
However, HDFC Bank stated that it expects repo rate to be increased by 20 bps. “We expect the RBI to increase the reverse repo rate by 20 bps (currently at 3.35 per cent) in the upcoming meeting. We expect the central bank to keep its stance accommodative and continue to manage liquidity through VRRRs (possible further extension of tenures from 28 days) and other market related instruments. The announcement of a more permanent liquidity absorption facility like the SDF is unlikely in the upcoming policy,” said HDFC Bank Chief Economist Abheek Barua in a statement.
“We expect the RBI to keep its growth forecast unchanged at 9.5 per cent, although sounding cautious on the Omicron risk. On inflation, we expect an upward revision in Q3 FY22 forecast from 4.5 per cent (last policy) by 50-75 bps and Q4 FY22 forecast from 5.8 per cent by 30-40bps,” Barua estimated.
While some experts vary on the policy rate this meeting, most expect rates to be changed in the next MPC meeting early next year.
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