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Reverse repo hike to be split between Dec and Feb
December 01, 2021
With ongoing calibration of liquidity surplus going about as a precursor, Acuité Ratings and Research expects a hike in the reverse repo rate, which is probably going to be split between December 2021 and February 2022 policy reviews.
The anticipated move-in reverse repo rate from 3.35 percent right now to 3.75 percent by February 2022 would assist with restoring the width of the policy rate corridor to its normal level of 25 basis points /bps (with repo rate being kept up with at 4%) from the current spread of 65 bps, the FICO credit rating agency said in a report.
“Having said that, we stay watchful of the risks emerging from the fresh resurgence of Covid cases in Europe and Africa alongside the uncertainty on the impact of the new variation (Omicron),” it said.
“This can possibly switch the continuous travel liberalization and might perhaps dampen worldwide growth prospects. This can likewise support the “wait and watch” approach of RBI, consequently slowing down the process on its policy normalization path,” Acuité said.
The LAF corridor effectively defines the operating procedure of monetary policy, with the marginal standing facility (MSF) as the upper bound (roof), the fixed overnight around repo rate as the lower bound (floor), and the policy repo rate in between.
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