RBI set to pause Repo Rate hike in April monetary policy meet: SBI research

MUMBAI: A research report by the country's largest bank, the State Bank of India (SBI) says that contrary to expectations of market participants of yet more 25 basis-point (bps) hike in rates, the country's largest lender State Bank of India (SBI) Research expects a status quo on rates.

The Monetary Policy Committee (MPC) of the apex bank is scheduled to meet in the first week of April 2023, for the next monetary policy review.

As a prelude to the meeting, the report from the largest lender of the country said, "Considering Repo Rate is already around 25 basis points higher than the optimal requirement (basis CPI, Core CPI and Fed rate), 6.5% Repo Rate could be considered as Terminal rate, therefore, we expect Status Quo from RBI in April MPC meeting."

The report says that the current 6.5 per cent Repo Rate could be the terminal rate for now. The Repo Rate is the interest rate at which the RBI lends money to all commercial banks. In early 2020, when COVID hit the world, the Repo Rate was 4 per cent. 

At the latest MPC of the RBI in early February, it had decided to raise the Repo Rate by 25 basis points to 6.5 per cent to keep inflation expectations anchored, break the persistence of core inflation and strengthen the medium-term growth prospects. 

Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. 

Commenting on the report, SBI’s Group Chief Economic Adviser Soumya Kanti Ghosh, said, "The (RBI’s) stance could continue to be withdrawal of accommodation, even as liquidity is now in deficit mode. RBI can always keep the options open in June (monetary) policy."


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