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Economists presented divergent views in their pre-monetary policy interaction with the Reserve Bank of India top brass, but expect that the repo rate will be hiked by 25 basis points.
“Macroeconomic issues such as inflation and growth were discussed. Due to divergent views from all economists, the RBI’s line of thinking could not be gauged,” said one of the economists who attended the meet.
The central bank will announce its second quarter monetary policy review on October 29.
Another economist, who attended the meeting, said the concerns raised related to macroeconomic issues, such as slowing GDP growth and rising inflation.
“Mostly, the discussions touched upon issues that the Governor has been speaking about,” the economist said on condition of anonymity.
Besides, a hike in the repo rate (the rate at which banks borrow short-term funds from the RBI) to 7.75 per cent from 7.50 per cent, economists also expect the marginal standing facility (an emergency window that banks can tap for funds) to be cut from 9 per cent to 8.75 per cent.
The repo rate is expected to be nudged up as inflation remains a concern. Further, a reduction in the MSF rate by 25 bps is likely to ease borrowing costs for banks.
The likely cut in MSF rate could help banks lend more in the busy season, which started from October 1 and lasts till March-end.
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