New Delhi: The Reserve Bank of India (RBI) is expected to maintain benchmark interest rates in successive monetary policy review on Wednesday amid concerns over new coronavirus variant Omicron.
The central bank’s three-day monetary policy committee meeting began earlier this week and according to a Reuters poll of economists, the RBI will maintain rates for the ninth time and will increase its reverse repo rate early next year and repo in the next quarter. rate will increase. ,
Read also: Omicron Covid version ‘almost certainly’ no more serious than Delta: Top US scientist Anthony Fauci
Even though RBI is expected to maintain status quo on interest rate policy, investors will keep a close watch on the announcement to get direction. RBI Governor Shaktikanta Das will announce the MPC’s decision through a webcast at 10 am. in Mumbai on Wednesday.
Here’s what to expect in RBI’s monetary policy review
According to news agency Reuters, a Reuters poll of 50 economists showed that the RBI will keep its benchmark interest rate at 4 per cent and the reverse repo rate at 3.35 per cent. The RBI can take comfort from the fact that retail inflation, which is taken into account while deciding on policy rates, is within the 2 per cent-6 per cent target range since July.
Morgan Stanley economists wrote, “We were earlier expecting the RBI to hike the reverse repo rate by 15-20 bps in December, but given the uncertainty arising from the new COVID-19 version, we now expect status quo “
Meanwhile, as of Monday 28 economists polled by Bloomberg expect the six-member Monetary Policy Committee to leave the buyback rate unchanged at 4 percent.
With the two-phase hike in the reverse repo rate starting Wednesday, traders will be up to cue about the policy’s inevitable return to pre-pandemic settings. Of the 24 economists surveyed, only seven say this is happening, while others have predicted no change.
On the inflation front, the RBI governor has repeatedly described it as transitory, once again heading towards the upper end of the RBI’s 2 per cent- 6 per cent target range. Rising vegetable prices, especially tomatoes, and a diminishing favorable base effect could threaten the central bank’s 5.3 per cent headline price-growth forecast for the fiscal year ending March.
Concerns over price pressures will remain a concern, especially in the backdrop of comments by Federal Reserve Chairman Jerome Powell that it was time the Fed retired the description of high inflation as “temporary.” According to Bloomberg, the makers are in action right now.
Of the six members of the MPC, five were in favor of keeping the policy stance favorable to offset risks from global growth until October. The Omicron version is spreading rapidly, which may be the reason why RBI needs to stand up.
As of now, the RBI is expected to maintain its growth forecast for the financial year ending March at 9.5 per cent, while flagging downside risks.
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