RBI to unveil first monetary policy of 2023 today amid concerns of further slowdown

Reserve Bank of India (RBI) Governor Shaktikanta Das will unveil the first monetary policy of the year 2023 on Wednesday, February 8, after a two-day review meeting that began on Monday. 

The decision of the six-member rate-setting panel of the RBI's Monetary Policy Committee (MPC) will be announced by the Governor amid expectations of a smaller 25 basis points rate increase or a pause on the rate hiking spree that started in May last year to check inflation. Notably, the monetary policy comes at a time when there are concerns about a further slowdown in economic growth and tight global financial condition.

RBI to announce first monetary policy of 2023

With retail inflation showing signs of easing and continuing below the Reserve Bank of India's upper tolerance level of 6%, as well as a projected slowdown in GDP growth in the upcoming fiscal year beginning in April, experts believe the central bank may only choose to raise the benchmark interest rate by 25 basis points.

Another opinion is that the RBI may press the pause button on the rate hike on Wednesday itself. According to the State Bank of India's Economic Research Department in a report titled 'Prelude to MPC Metting on Feb 6-8, 2023', the central bank may opt to pause in the February policy.

RBI's stance could continue to be the withdrawal of accommodation, even as liquidity is close to neutral, the SBI report said. "Even though the RBI could pause as it allows past rate actions to work with long and variable lags, the RBI could still guide the markets with a rate action in future that will be purely data dependent," the report added.

It is pertinent to mention that in its December monetary policy review, the RBI raised the key benchmark interest rate, i.e. the Repo Rate, by 35 basis points (bps) after delivering three back-to-back increases of 50 bps.

Notably, since May last year, the central bank has increased the short-term lending rate by 225 basis points to contain inflation, mostly driven by external factors, especially global supply chain disruption following the Russia-Ukraine conflict.

(With inputs from PTI)