The Reserve Bank of India (RBI) has decided not to make any changes in the repo rate in the meeting of the Monetary Policy Committee (MPC). RBI Governor Shaktikanta Das said that the repo rate will remain at 4% and the reverse repo rate at 3.35%. Das said that the threat of corona is not over yet. The economy is progressing as per the expectations of the MPC. The economy is improving due to vaccination.
After the three-day meeting on Friday, RBI Governor Shaktikanta Das said, ‘RBI has not made any change in the repo rate and reverse repo rate. Repo rate remains at 4% and reverse repo rate at 3.35%.’
The three-day meeting of the 6-member Monetary Policy Committee (MPC) began on 6 October. RBI Governor will address the media at 12 o’clock today. RBI’s focus is on continuously reducing inflation and recovery of economic growth.
Governor Das said that the economic output still remains below the level before Covid. But the inflationary trend is more favorable than expected and economic activity is picking up gradually. High frequency indicators show that economic activity has picked up in the second quarter.
It is worth noting that last year when the wheels of the economy came to a halt due to Covid, the Reserve Bank in May immediately reduced the repo rate by 40 basis points to 4% to bring recovery and support to growth. It also cut the reverse repo rate by 40 basis points to 3.35%. According to experts, policy normalization can be started by increasing the reverse repo rate.
According to Indranil Pan, Chief Economist, Yes Bank, and Runen Banerjee, Economic Advisory Services Leader, PwC India, the interest rate hike may start from the first quarter of FY2023. CARE Ratings Chief Economist Madan Sabnavis says that the Reserve Bank will first increase the reverse repo rate. He can increase it to 3.50% in the February policy.
Subhada Rao, Founder, QuantEco Research also believes that the Reserve Bank may increase the reverse repo rate in the coming months. According to him, the reverse repo rate can be increased by 40 basis points between December and February. The repo rate can be increased in the first quarter of the new financial year. Mahindra Group Chief Economist Sachidanand Shukla believes that the situation may remain the same till the end of the next calendar year.