RBI leaves key rates on hold amid Omicron risks; analysts weigh in

 The committee held the lending rate, or the repo rate, at 4%. The reverse repo rate, or the key borrowing rate, was also maintained at 3.35%

The Reserve Bank of India's monetary policy committee (MPC) kept its key lending rate steady at record lows on Wednesday, as expected, with policymakers looking to gauge the impact of the Omicron coronavirus variant on the economic recovery.

The committee held the lending rate, or the repo rate, at 4%. The reverse repo rate, or the key borrowing rate, was also maintained at 3.35%.

All 50 economists polled by Reuters had expected no change in the repo rate and did not expect a change before the second half of 2022.

COMMENTARY

GARIMA KAPOOR, ECONOMIST - INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

"Notwithstanding improving economic outlook and emerging concerns on inflation, the MPC held rates steady and retained guidance amid Omicron-related uncertainty and to support broad-based and durable recovery. However, as expected, RBI continued to amble along the liquidity policy normalization path by hiking VRRR (variable-rate reverse repo) quantum, thus laying the groundwork for a likely first reverse repo rate hike early next year."

"We expect MPC to hike reverse repo over Feb 2022 and April 2022 and are penciling in the first repo rate hike in August 2022."