RBI Expected To Pause Interest Rate Hike In April Policy Meet: SBI Research

The Reserve Bank of India (RBI) is likely to pause their interest rate hike and the current 6.5 per cent repo rate could be the terminal rate for now, said SBI Research in its latest Ecowrap report.

The repo rate is the interest rate at which the RBI lends money to all commercial banks. The upcoming monetary policy meeting is scheduled for the first week of April 2023.

Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
In early 2020 when Covid hit the world, the repo rate was 4 per cent.

"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," the SBI Research, authored by Group Chief Economic Adviser State Bank of India Soumya Kanti Ghosh, said.

The report claimed that the RBI has enough reasons to pause the repo rate hike in the April meeting.

Thus in all the scenarios, the peak rate is lower than current RBI rate at 6.5%. Alternatively, while RBI has managed inflation by frontloading the rate hikes, an appropriate policy response could be now looking through the cycle to gauge the impact of past rate hikes and take a considerate pause in April policy, according to the SBI Research report.

RBI has projected inflation to remain in the range of 5.2% to 5.5% in FY 24.