Economists see RBI going up by 50 bps next week

MUMBAI: Economists unanimously forecast that the central bank has no choice but to raise rates by 50 bps next week and bring the closing rate to 6.25% in December.
Economists from SBI, UBS, Goldman Sachs, Barclays and Bank of Baroda in a rare unanimous call showed the RBI-led monetary policy committee giving a boost of 50 bps on September 30. bringing the overall repo rate up 290 bps to 5.90% since May of this year.
Soumya Kanti Ghosh, chief economist for the nation’s largest lender SBI, in a detailed note on Monday said a half percentage point increase in repo rates looks imminent in a positive response. against external shocks.
“We expect the highest repo rate in the cycle at 6.25%. A final rate hike to 35 bps is expected in December policy,” he said.
Liquidity has become in deficit after 40 months, which looks like another headwind for the central bank, he added, which could force RBI to support the market through changing CRR and OMO.
Making a point, Tanvee Gupta-Jain, chief economist at UBS Securities India, said in the base case she expects the MPC-RBI to preload the rate hike cycle and increase the repo rate by 50 bps ( compared to 35 bps previously) next week with terminal repo rates to 6.25% (previously 6%) in December.
On the positive side, she said the large current account deficit, rising CPI inflation and tense fiscal situation were mainly due to supply-side factors rather than easy credit conditions driving demand. domestic.
Rahul Bajoria, chief economist at Barclays India also raised his repo rate forecast to a 50 bps increase next week (previously 35 bps) and a 35 bps increase at the December meeting (previously 25 bps), with increased risk to the forecast if commodity prices are higher in Q4.
“We now anticipate another 50 bps rate hike in 2023 (previously 75 bps), which would bring repo rates to 6.75% by April 2023.”
The UK lender also expects the MPC-RBI to change its stance to neutral on falling commodity prices as it thinks inflation has peaked. But we think tighter global financial conditions and high inflation will keep the MPC stuck in its flagship tightening cycle.
Madan Sabnavis, chief economist at Bank of Baroda also said recent developments in the forex market could drive highs above 50 bps to keep pace with other markets to retain investor interest. because of the 25-35 bps gain there will be. signal that the RBI is confident that the worst of inflation is over.
Goldman Sachs’ Santanu Sengupta said it also recorded a gain of 50 bps (previously 35 bps) and a gain of 35 bps in December (previously 25 bps), with upside risks to forecasts if commodity prices are higher. in Q4.
We now expect the next rate hike to be 50 bps in 2023 (previously 75 bps), which would bring the repo rate to 6.75% by April 2023.

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