RBI Stays Cautious, Keeps Policy Rates On Hold In December 2021 Policy

The Reserve Bank of India as was largely expected kept policy rates, including the reverse repo rate on hold. The expectations from the country's central bank was to keep policy rates on hold and so it was.
While there were some hopes of the reverse repo rate being hiked, so as to narrow the gap between the repo and the reverse repo rate, that too did not happen.

The stance by the RBI was kept as "accommodative".

"The policy will likely again be used as a lever to prepare the markets for a gradualist approach toward normalization. The redistribution/re-pricing of existing liquidity via VRRR tenor/quantum/cut-offs has smoothly helped the alignment of some money market rates toward the Repo rate. We believe the markets will still be assuaged about any premature tightening of financial conditions," Emkay Global had said in a report earlier to the policy announcement.

Globally, centrally banks around the globe continue to be worried over inflationary conditions in their respective economies and they might adopt a path towards normalization. Already we have seen the US Fed deciding to reduce its bond purchase programme and the country's central bank may even tighten rates next year.

The RBI too has been faced with inflation worries, but, so far we are not seeing any tightening measures to battle inflation.