RBI may retain policy rates: Experts

In view of inflationary concerns, the Reserve Bank is likely to maintain the status quo on key policy rates in its next bimonthly economic policy, which will be the first after the presentation of the Union Budget for 2022-23.

Experts, however, are of the opinion that RBI’s monetary policy committee (MPC) may change the policy stance from ‘accommodative’ to ‘neutral’ and tinker with the reverse-repo rate as part of the liquidity normalisation process. The next bi-monthly monetary policy is scheduled to be announced on Wednesday at the end of three-day deliberations of the MPC beginning Monday.

Madan Sabnavis, Chief Economist, Bank of Baroda, said given the assurance on growth as per the budget and the possibility of inflation rising mainly due to crude oil, “we expect the RBI to start the process of normalisation by increasing the reverse repo rate by 25 bps”. Shanti Ekambaram, Group President, Consumer Banking, Kotak Mahindra Bank, said amidst global inflation pressures, tightening monetary policies by global central banks, high oil prices, domestic inflation, and the sharp rise in domestic yields, the MPC will have a tight rope-walk as they discuss the monetary policy stance and interest rates in the coming week. Shruti A g g a r w a l , c o - f o u n d e r, Stashfin, said India’s GDP growth, which is estimated at 9.2 per cent for 2021-22 will be one of the fastest globally. To maintain and achieve this rate of growth, it’ll be challenging for the government to balance upward inflation as well as the risks associated with uncertainty around COVID and oil prices.

The last MPC held in December 2021 had kept the benchmark interest rate unchanged at 4 per cent and decided to continue with its accommodative stance against the backdrop of concerns over the emergence of the new coronavirus variant Omicron. It was the ninth time in a row that the rate setting panel had maintained the status quo. (PTI)