Monetary policy: Status quo on rates and stance likely

The economy is recovering fast but nobody knows yet how serious the Omicron threat is. The RBI can afford to err on the side of caution and hold on to rates for now

Blame it on Omicron. That is, if the Monetary Policy Committee (MPC) of the Indian central bank decides to hold on to policy rates this week.

Till about a fortnight back, everyone was convinced that the MPC would start the unwinding process by raising the reverse repo rate at this week’s meeting. The debate was on the quantum of hike: Would it be a 40-basis point hike in reverse repo rate, to increase it 3.75 per cent and thereby narrow the gap between the repo and reverse repo rates — the liquidity adjustment corridor (LAF) — to 25 basis points?