RBI Monetary Policy News Live Updates: RBI Governor Shaktikanta Das to announce MPC outcome shortly; may hike reverse repo rate

Here's what ET Poll says

This time, the monetary policy is expected to take a call on growth in particular as the budget is sanguine about the same. This stance will be a pre-requisite for the commencement of the plans for liquidity normalisation.

- Madan Sabnavis, chief economist at Bank of Baroda

RBI MPC maintained status quo in its December meeting. How have key metrics changed since then?

Markets would be looking forward to assurance and support from RBI to ensure that the massive borrowing program goes through smoothly

- Anand Nevatia, fixed-income fund manager at Trust Mutual Fund

Markets Update

Current status

Two key concerns are likely to weigh in -- the future of fiscal-monetary policy coordination in light of an expansionary budget in India and the potential impact of imminent rate hikes and quantitative tightening by the U.S. Fed

- Aastha Gudwani, economist at Bank of America

Meanwhile, a missive from Deloitte

Growth Pangs

Before the budget, I was looking at a 20 basis point hike in the reverse repo rate in the February meeting, but now the risk is that they will push it out to the next meeting.

- Pranjul Bhandari, HSBC

MPC Meet | Growth has gathered sufficient momentum. RBI should now focus on fighting inflation, says Mythili Bhusnurmath, ET's consulting editor

Fighting Inflation

ET Poll: Reverse repo rate may be hiked by 15-40 basis points

When you are in a pandemic and you have an uneven growth impact, it is extremely important for fiscal policy to do targeted support and push on longer term goals. The role of monetary policy at this stage is extremely limited in terms of providing relief to those at the lower end of the income spectrum. There are risks that come from ultra-accommodative conditions and from tolerating higher inflation.

- Sonal Varma, Nomura

Bond traders will look for clarity from RBI to keep the government’s borrowing costs down

The way one should think about monetary policy is that exceptional measures were required during the pandemic. Now, we are exiting the pandemic and fiscal policy continues to be supportive, so monetary (policy) has to now slowly go back to its job of anchoring inflation and inflation expectations.

- Sajjid Chinoy, JP Morgan

The Union Budget 2022 has stressed on growth rather than fiscal consolidation clearly indicating its priority. In order to support this, the RBI should maintain the low interest rate regime and keep the policy repo rate unchanged in its monetary policy

- Mahesh Desai, Chairman, Engineering Export Promotion Council (EEPC) of India

The RBI has not changed key policy rates for over one-and-a-half years. The last time the RBI changed policy rate was in May 2020 when it had slashed the key interest rates to a historic low to support the economy ravaged by the COVID-19 pandemic.

Seeming cooling off of Russia-Ukraine tussle and reversal in oil prices have helped sentiments turn up across the globe. In case the RBI raises repo rate (and not reverse repo rate) the markets could take it negatively.

- Deepak Jasani, Head of Retail Research, HDFC Securities

Rupee declines by 10 paise to 74.84 ahead of RBI policy

The MPC has been mandated by the government to keep the inflation in the range of 2-6 per cent.

This policy review is particularly important as it comes just nine days after the 2022 budget announcements. This is the last policy review of the financial year 2021-22.

The MPC meeting was originally scheduled to take place 7-9 February 2022. However, it was rescheduled to 8-10 February after Maharashtra Government declared February 7 a public holiday to mourn the death of legendary singer Bharat Ratna Lata Mangeshkar.

Citing the massive spike in credit growth during the first half and the steeper fall in deposits and the resultant rise in term money rates, coupled with the record high borrowings, an SBI report has called for a 20 bps increase in reverse repo rate outside the MPC ambit so that the central bank find buyers for the flooding new debt papers.

The MPC has been tasked by the government to keep inflation in the range of 2-6 per cent.

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.

According to Brickwork Ratings, the RBI may continue to hold the policy rates at current levels in the upcoming policy meeting.