The six-member Monetary Policy Committee headed by Reserve Bank of India Governor Shaktikanta Das started deliberations on the bi-monthly policy review on Monday, while the outcome of the meeting will be announced today.
New Delhi: The Reserve Bank of India (RBI) is likely to hike key policy rate in its monetary policy review on Wednesday. The RBI may hike the repo rate by 40 basis points to 4.80 percent. Last month, the Reserve Bank of India took an unscheduled decision thereby increasing the repo rates by 40 bps to 4.40 percent, taking everyone off-guard. This was the first increase in the policy repo rate in nearly two years.
Repo is the rate at which Reserve Bank of India lends funds to commercial banks when needed. It is a tool that the central bank uses to control inflation. The reverse repo rate is the rate at which the RBI borrows from banks. The repo rate currently stands at 4.40 percent while the reverse repo rate is at 3.35 percent. Reverse repo rates has remained unchanged since May 2020.
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The six-member Monetary Policy Committee headed by Reserve Bank of India Governor Shaktikanta Das started deliberations on the bi-monthly policy review on Monday.
In a recent interview, RBI Governor Das said that the expectation of rate hikes in June is a “no-brainer”.
Considering the recent uptick in inflationary pressure, the RBI is likely to revise the inflation forecast for the current financial year to above 6 per cent.In April, the RBI revised upward the inflation forecast for the current financial year to 5.7 per cent from its earlier projection of 4.5 per cent announced in February, said an ANI news report.
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Meanwhile, a Bank of America Securities research note has also said that the RBI may increase the repo rate by another 0.40 percent. Apart from this, in the August review also, it can increase by 0.35 per cent. If this does not happen, then the RBI can make up its mind to increase by 0.50 per cent next week and 0.25 per cent in August, the research note said.
