MPC meet starts today: RBI likely to keep key policy rates unchanged

Reserve Bank of India (RBI) Governor Shaktikanta Das-led Monetary Policy Committee is starting its three-day (December 6-8) meeting today. In its last monetary policy statement in October, the RBI had kept the benchmark policy rate "unchanged".

The five-member MPC committee led by Shaktikanta Das will deliberate upon consumer confidence, households' inflation expectations, corporate sector performance, credit conditions, the outlook for the industrial, services and infrastructure sectors, and the projections of professional forecasters.

Analysts and experts have said the MPC could maintain the status quo in its monetary policy, considering the emergence of the new coronavirus variant named Omicron.

Most financial institutions are of the view that the RBI may not change key lending rates. "...we believe the talks of a reverse repo rate hike in the MPC meeting may be premature as RBI has been largely able to narrow the corridor without the noise of rate hikes and ensuing market cacophony," an SBI research report said.

As per the Kotak Economic Research report, there are certain uncertainties around the new Covid-19 variant. It said the central bank would possibly want to have some sort of clarity on it before it could take a final decision on key policy rates.

Also read: RBI will ensure ample liquidity to aid growth, says Shaktikanta Das

"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.

If the central bank keeps the key lending rates unchanged, it'll be for the ninth consecutive time that the central bank has not changed its stance. The RBI has projected the CPI inflation at 5.7 per cent during 2021-22 -- 5.9 per cent in the second quarter, 5.3 per cent in the third, and 5.8 per cent in the fourth quarter of the fiscal, with risks, broadly balanced.

Also read: Amid Omicron threat, RBI may keep key policy rate unchanged: Experts

In its last policy statement, the RBI had kept the repo rate unchanged at 4 per cent, while the reverse repo rate remained at 3.5 per cent. The apex bank also kept its "accommodative" stance.

If the RBI maintains the status quo in policy rates on Wednesday, it would be the ninth consecutive time since the rate remains unchanged. Before this, the RBI had changed the key policy rates on May 22, 2020, in its bid to perk up demand by cutting the interest rate to a historic low.

Notably, experts say the Centre wants the RBI to keep the retail inflation under check and within the target at 4 per cent with a margin of 2 per cent on either side.

With PTI inputs

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