The Reserve Bank of India (RBI) is expected to pause its interest rate hike. The current 6.5 per cent Repo Rate could be the terminal rate for now, said SBI Research in its latest Ecowrap report on Monday.

The Repo Rate is the interest rate at which the RBI lends money to all commercial banks. 

The next monetary policy meeting is scheduled for the first week of April 2023. 

At the latest Monetary Policy Committee (MPC) of the RBI in early February, it had decided to raise the Repo Rate by 25 basis points to 6.5 per cent to keep inflation expectations anchored, break the persistence of core inflation and strengthen the medium-term growth prospects. 

Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. 

In early 2020, when COVID had hit the world, the Repo Rate was 4 per cent. 

“The (RBI’s) stance could continue to be withdrawal of accommodation, even as liquidity is now in deficit mode. RBI can always keep the options open in June (monetary) policy,” the SBI Research, authored by State Bank of India’s Group Chief Economic Adviser Soumya Kanti Ghosh, said. 

The report asserted that the RBI had enough reasons to pause the Repo Rate hike in the April meeting.