Mumbai: The Reserve Bank of India is set to maintain its benchmark lending rates during the upcoming monetary policy review to facilitate a faster economic recovery from the third Covid wave, according to economists.
On the other side, the central bank may give up its supportive position as a precursor to future rate hikes in order to drain surplus liquidity and reduce inflationary pressure.
"Given the persisting uncertainties, we expect the MPC to maintain the status quo in February 2022," said Aditi Nayar, Chief Economist at ICRA. "However, because the third wave's impact is expected to be minimal, policy normalisation will begin in April 2022, with a stance change to neutral and a reverse repo rise." The central bank's MPC has kept the repo rate, or short-term lending rate, for commercial banks at 4 percent for the time being. In addition, the reverse repo rate was maintained at 3.35 percent.
"Because the RBI has successfully restored normal liquidity, a minimal 15 basis point increase on Reverse Repo is widely predicted." Soumyajit Niyogi, Associate Director, India Ratings and Research, expressed his opinion. In the face of increasing inflationary pressures around the world, systemically significant central banks have begun to roll down their pandemic-era accommodating policies.
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