RBI likely to keep key policy rate unchanged: Experts

Amid a global scare due to the new coronavirus variant Omicron, the RBI is likely to maintain status quo in its upcoming monetary policy and wait for a more opportune time to calibrate benchmark interest rate in order to promote growth without sacrificing the main objective of containing inflation. The Reserve Bank Governor-headed Monetary Policy Committee is scheduled to meet during December 6-8. The decision of the rate setting panel would be announced on December 8. The central bank had kept the benchmark policy rate unchanged in October.

"…we believe the talks of a reverse repo rate hike in the MPC meeting may be premature as RBI has been largely able to narrow the corridor without the noise of rate hikes and ensuing market cacophony," said an SBI research report. According to it, the RBI is not obliged to act on reverse repo rate only in MPC. "Also, change in reverse repo rate is an unconventional policy tool that the RBI has effectively deployed during crisis when it moved to a floor instead of the corridor," it added.

A Kotak Economic Research report said with uncertainty around the new Covid variant, the RBI would possibly wait for some clarity before moving decisively on rates. "We maintain our call for a reverse repo rate hike in February with the December meeting remaining a close call. We expect the RBI to continue on its path of normalisation with the reverse repo rate hike in February policy and repo rate hike in mid-2022-23," it said.