With the new Covid-19 variant Omicron pushing economies across the globe into a state of uncertainty, the Reserve Bank of India (RBI) in its monetary policy review next week will most likely keep the key policy interest (repo) rate on hold to give economic growth a leg-up.
Repo rate is the rate at which the RBI lends money to banks or financial institutions against government securities. It is currently at 4%, the lowest ever. A status quo on interest rates will also ensure home, auto and other personal loans remain cheap.
On the economic growth front, most indicators have surpassed pre-Covid levels. Two backbones of India’s economy — manufacturing and services sector — point towards a sharper recovery in the Oct-Dec quarter. But Omicron may pose a threat to near double-digit growth and prompt the RBI to hold rates.
But inflationary pressures may force the central bank to give the first rate hike as early as in the next policy review in February.
The three-day Monetary Policy Committee (MPC) meet begins on Monday.
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