Hat-trick on rate hike almost certain, but will the RBI change its stance?

Given the rupee's slide and soaring crude prices, it's almost certain that the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will raise the repo rate for the third time in a row.

In the last policy meet, the RBI hiked repo rate by 25 basis points to 6.50 per cent, for the second time in a row. Reverse repo -- the rate at which the Reserve Bank borrows money from commercial banks within the country -- was adjusted to 6.25 per cent. The MPC had kept its policy stance neutral.

Most analysts expect the central bank to hike rates by 25 basis points (bps) when it announces monetary policy today. However, the key thing to watch out for this time around is whether the RBI will change its policy stance.

That apart, RBI is also expected to employ various liquidity management tools to ease the tight liquidity and the volatility in the money markets caused by the sharp depreciation in the rupee and the recent defaults in Commercial Papers (CP) by a large conglomerate.

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