The monetary policy committee (MPC) of the RBI started its three-day deliberations on Monday amid murmurs of a pause in the policy repo rate, though the majority believe a 25-basis-point rate hike is on the cards.

The RBI began to increase rates from May as it sought to tackle inflation which remained above the upper bound of 6 per cent. It has so far raised the policy repo rate by 225 basis points.

The research wing of the SBI said it does not expect the RBI to raise rates. ''We expect the RBI to pause in February policy,” it said in a report titled ‘’Prelude to MPC Meeting on Feb 6-8, 2023’’. However, it felt MPC could retain the withdrawal of accommodation stance, even as liquidity is close to neutral.

Most analysts expect the pace of the hike to be lowered to 25 basis points, from 35 basis points in the previous meeting, followed by a pause.

“Even though the RBI could pause as it allows past rate actions to work with long and variable lags, it could still guide the markets with a rate action in the future that will be purely data dependent.” The report said the 6.25 per cent repo rate could be the terminal rate for now.

According to Suvodeep Rakshit, senior economist at Kotak Institutional Equities, while the MPC’s decision is finely balanced between pause and a 25 basis points hike, the RBI could raise the repo rate by a last 25 basis points.

''This would help the RBI to be on a prolonged pause as it assesses the lagged impact of the past rate hikes and input price movements, the evolution of the global and domestic demand conditions and behaviour of global central banks,’’ he added.

Rakshit said MPC will view the recent inflation prints favourably. Retail inflation in Q3 at 6.1 per cent is around 50 basis points lower than RBI’s estimate. In January-March 2023, retail inflation is also likely to be 20-30 basis points lower than RBI’s estimate of 5.9 per cent.