MUMBAI: Amid the rising scare from the new Coronavirus variant Omicron and ahead of the MPC meet, SBI house economists have urged the central bank to delay liquidity normalisation measures through a reverse repo hike, as such a “prudent step” in the current situation will give more time for economic recovery to strengthen further.
The RBI has been sucking out excess liquidity through other measures so far, which has resulted in liquidity surplus massively being brought drastically in the recent months, SBI Research said in a note.
It noted that the use of the reverse repo tool need not be limited to the monetary policy announcement alone.
In the weekend note, Soumya Kanti Ghosh, chief economic adviser at the State Bank of India Group, said that as the situation is still evolving, a status quo on reverse repo rates may be maintained in the next policy announcement on December 8.
This is keeping in mind that the effective rate has already been pushed up with VRRRs (variable reverse repo repurchases) and the amount and tenor of the same can be finetuned for the desired outcome, she added.
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