RBI sees leaving repo rate unchanged in first review of FY22

The Monetary Policy Committee is likely to leave the signal repo rate unchanged in the first bi-monthly Monetary Policy Review of 2021-22 as economic recovery is still tentative and retail inflation.

The six-member MPC has kept the repo rate steady at 4% in the last four bi-monthly Monetary Policy Reviews.The last time the repo rate was changed was in May, 2020, when it was cut from 4.40% to 4%. Then the reverse repo rate was also cut from 3.75% to 3.35%.

The second wave of COVID-19 and its impact on the economy is expected to figure prominently in MPC’s deliberations. The committee is expected to persist with the accommodative monetary policy stance.

Edelweiss Securities expects the RBI to leave rates unchanged and stick to its accommodative stance. In a report it says, “Economic recovery is still uneven and the pace of improvement has slowed of late after a sharp rebound from lows (IIP has averaged just about 0.6% YoY in the past five months). Further, the recent rebound in COVID cases poses a fresh challenge. Thus, continued policy accommodation is very much warranted.”

Rahul Bajoria, Chief India Economist, Barclays Securities (India) Pvt Ltd, and Shreya Sodhani, Research Analyst, Barclays Investment Bank, Singapore, in a report, stated, “We believe the RBI can maintain its monetary accommodation for a while to enable the recovery to become entrenched.”