Reserve Bank Of India May Refrain From Reverse Repo Hike On Omicron Worry

Fifty economists surveyed by Reuters in a December 1-3 poll expect the RBI to hold its benchmark repo rate at 4.00 per cent.

The Reserve Bank of India will likely hold off on raising its key borrowing and lending rates on Wednesday, as it adopts a cautious tone amid the spread of the Omicron coronavirus variant, economists and market participants said.

Fifty economists surveyed by Reuters in a December 1-3 poll expect the RBI to hold its benchmark repo rate at 4.00 per cent.

The reverse repo rate - the interest rate banks earn for parking short-term funds at the RBI - is mostly expected to remain unchanged at 3.35 per cent, but several economists have priced in a small increase as the central bank tries to normalise the gap between the lending and borrowing rate to pre COVID-19 levels.

"We believe, the RBI may deflate the hype around reverse repo hike in monetary policy by explaining the virtues of using reverse repo change as a pure liquidity tool and not a rate tool," Soumya Kanti Ghosh, chief economic adviser at the State Bank of India wrote in a note.