MPC meet: RBI likely to keep rates unchanged, say experts

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The Reserve Bank of India’s monetary policy committee is likely to keep repo rates unchanged when it announces its decisions on Friday. This is expected to take place as the MPC is aiming to support the recovering economic growth.

HDFC Bank’s Chief Economist Abheek Barua told Business Today on Wednesday that the apex bank is likely to retain its accommodative stance without any increase in the reverse repo rate. Barua said that global risk from the China ‘shock’, the US Fed taper, and apprehensions about the US debt ceiling not getting raised have escalated. “These would have supply side effects for industrial intermediates and fuel as well as demand side manifestations as global growth is likely to slow down,” he stated.

The Federation of Indian Chambers of Commerce & Industry (FICCI) in its latest Economic Outlook Survey too has stated that RBI will maintain status quo on the repo rate and continue its accommodative stance in today’s monetary policy. “Growth remains a clear priority for the Central Bank and the same has been clearly communicated in the past rounds of monetary policy announcements,” said the industry body.

Reuters, too, found that all 60 forecasters in a poll they had conducted saw no change in the repo rate. RBI is expected to raise the repo rate only in April-June 2022.

Madan Sabnavis, chief economist at CARE ratings told the agency that RBI is unlikely to change the repo rate at a time when “the economy is expected to see the much-awaited boost in consumption triggered by festive demand”. Sabnavis, while not ruling out the possibility of a rate change, added that it is unlikely to be part of the statement this time.

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The repo rate was last cut by 115 basis points (bps) in early 2020, and has been held at a record low of 4 per cent since May 2020. The reverse repo rate was reduced by 155 bps to 3.35 per cent.