 "Here's what MPC may take into account before announcing its decision today")
As the six-member Monetary Policy Committee (MPC) is set to announce the review of the policy on Thursday, all eyes are on whether the central bank will ‘formally’ start unwinding the ultra-loose monetary policy by hiking the reverse repo rate, thereby reducing the policy corridor (the gap between the repo and reverse repo rate).
The gap, which is 25 basis points (bps) during normal times, has widened to 65 bps since the onset of the Covid-19 pandemic.
The market widely expects the RBI to raise the reverse repo rate by 15-40 bps. There is also talk of a hike in the cash reserve ratio (CRR), because there may be a need for the RBI to conduct open market operations to infuse liquidity.
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