MUMBAI: A few days after the US Fed raised interest rates, RBI Experts say the policy rate hike is likely to continue for the third time in a row by 25-35 basis points to test high retail inflation.
The central bank has announced a gradual withdrawal of its accommodative monetary policy stance.
The Reserve Bankscale settings panel of – Monetary Policy Committee – will meet on 3 August for three days to consider the prevailing economic situation and publish a bimonthly review on Friday.
With retail inflation staying above 6% for six months, the RBI raised its short-term borrowing rate (repo) twice – to 40 basis points in May and 50 basis points in June.
The current repo rate of 4.9% is still lower than the pre-Covid level of 5.15%. The central bank slashed its benchmark interest rate sharply in 2020 to address the crisis caused by the pandemic.
Experts say that Reserve Bank of India (RBI) will raise the benchmark rate to at least pre-pandemic levels this week and even higher in the months to come.
“We now expect the RBI MPC to raise the policy repo rate by 35 bps on August 5 and change its stance to corrected tightening,” the BofA Global Research report said.
It also cannot rule out the possibility of a sharp 50 bps increase and a measured 25 bps increase.
A research report by Bank of Baroda said while Federal Reserve increased the speed to 225 bps in CY22, RBI increased the repo rate to 90 bps. An aggressive Fed rate hike is stoking expectations that the RBI could also take the load ahead of its rate hikes.
However, conditions in India do not warrant a positive stance by the RBI, it added.
“…in the absence of any new shocks, India’s inflation trajectory is likely to evolve in line with the RBI’s projections. We therefore anticipate that the RBI could just raise interest rates,” he said. rate 25 bps on August 22, followed by another 25 basis points it said it would raise rates in the next two meetings.
The government has tasked the Reserve Bank with ensuring that inflation based on the consumer price index remains at 4% by a margin of two percent on each side.
Dhruv Agarwala, Group CEO, Housing.com, said that while other banking regulators around the world, including the US Fed, are raising interest rates aggressively, the situation in India has yet to secure that approach.
“According to our estimates, it will be between 20-25 basis points,” he said.
In a report, Radhika Rao, Managing Director and Senior Economist at DBS Group Research, said the RBI monetary policy committee is expected to focus on price stability over the next two quarters. .
Factoring in peak inflation in the July-September quarter, “we now expect a 35 bps increase in August, followed by three 25 bps for closing rates to level off in 6% at the end of fiscal year 23,” she said.
Retail inflation based on the Consumer Price Index (CPI), which the RBI takes into account when making its monetary policy, has been above 6% since January 2022. It was 7.01% in June PTI NKD CS
The central bank has announced a gradual withdrawal of its accommodative monetary policy stance.
The Reserve Bankscale settings panel of – Monetary Policy Committee – will meet on 3 August for three days to consider the prevailing economic situation and publish a bimonthly review on Friday.
With retail inflation staying above 6% for six months, the RBI raised its short-term borrowing rate (repo) twice – to 40 basis points in May and 50 basis points in June.
The current repo rate of 4.9% is still lower than the pre-Covid level of 5.15%. The central bank slashed its benchmark interest rate sharply in 2020 to address the crisis caused by the pandemic.
Experts say that Reserve Bank of India (RBI) will raise the benchmark rate to at least pre-pandemic levels this week and even higher in the months to come.
“We now expect the RBI MPC to raise the policy repo rate by 35 bps on August 5 and change its stance to corrected tightening,” the BofA Global Research report said.
It also cannot rule out the possibility of a sharp 50 bps increase and a measured 25 bps increase.
A research report by Bank of Baroda said while Federal Reserve increased the speed to 225 bps in CY22, RBI increased the repo rate to 90 bps. An aggressive Fed rate hike is stoking expectations that the RBI could also take the load ahead of its rate hikes.
However, conditions in India do not warrant a positive stance by the RBI, it added.
“…in the absence of any new shocks, India’s inflation trajectory is likely to evolve in line with the RBI’s projections. We therefore anticipate that the RBI could just raise interest rates,” he said. rate 25 bps on August 22, followed by another 25 basis points it said it would raise rates in the next two meetings.
The government has tasked the Reserve Bank with ensuring that inflation based on the consumer price index remains at 4% by a margin of two percent on each side.
Dhruv Agarwala, Group CEO, Housing.com, said that while other banking regulators around the world, including the US Fed, are raising interest rates aggressively, the situation in India has yet to secure that approach.
“According to our estimates, it will be between 20-25 basis points,” he said.
In a report, Radhika Rao, Managing Director and Senior Economist at DBS Group Research, said the RBI monetary policy committee is expected to focus on price stability over the next two quarters. .
Factoring in peak inflation in the July-September quarter, “we now expect a 35 bps increase in August, followed by three 25 bps for closing rates to level off in 6% at the end of fiscal year 23,” she said.
Retail inflation based on the Consumer Price Index (CPI), which the RBI takes into account when making its monetary policy, has been above 6% since January 2022. It was 7.01% in June PTI NKD CS
