RBI MPC Meeting 2022: Monetary Policy Committee to meet from Monday - See what can be expected

RBI Monetary Policy Committee Meeting 2022: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will commence from Monday, February 7, 2022. The three-day meet will continue till February 9, 2022. This will be the last monetary policy decision for this fiscal year. 

See Zee Business Live TV Streaming Below:

US brokerage Bank of America Securities has maintained that the Reserve Bank will leave rates unchanged next week, recognising growth-focused and capex-driven fiscal expansion, which though poses huge price pressure and interest rate risks later, as per a PTI report. 

The key repo rate has been at 4 per cent since May 2020, an all-time low, even though bond yields have been heading north for many months now.

Stating that the Budget prioritises growth over fiscal consolidation, BofA analysts said they see the MPC leaving rates unchanged on February 9 when the central bank will unveil the last policy review of this fiscal, and undertake gradual tightening measures.

The market has been expecting a 25 bps reverse repo tightening. Its assumption got cemented when the Budget announced a record borrowing plan -- gross borrowing at Rs 14.95 lakh crore and net borrowing of Rs 11.6 lakh crore (much higher than BofA estimates of Rs 13 lakh crore and Rs 9.6 lakh crore).

Although in headline terms, fiscal deficit is expected to fall from 6.9 per cent in FY22 (up 10 bps from the revised estimate) to a budgeted 6.4 per cent in FY23, the brokerage expects the provisional actuals for FY22 fiscal deficit to come in line at 6.8 per cent and at 6 per cent next fiscal, BofA said in a note on Friday.

Arvind Chari, Chief Investment Officer (CIO) at, Quantum Advisors said, "With the government well and truly accepting the mantle of reviving growth, the RBI no longer needs to prioritise growth over inflation. Their current stance of ‘accommodative policy for as long as necessary to revive growth’ needs to be changed." 

He suggested that given that the economy has recovered and does not need lower rates or higher liquidity, the MPC should change its monetary policy stance to Neutral. With oil prices above USD 90/brl and threatening to go higher, they should also mention that the MPC would now incrementally prioritise inflation and that the RBI should worry about financial stability over growth revival. 

He also suggested that given that the VRRR auctions are happening at 3.99 per cent; close to the Repo rate of 4 per cent, it is time to increase the reverse repo rate to 3.75 per cent and narrow the LAF corridor to 25 bps. This will reduce the overnight and money market rate volatility.