The Reserve Bank of India (RBI) will start its three-day session Monetary Policy Committee meeting Today, Monday. Financial markets will keenly watch the Committee’s stance as consumer inflation is still above the 6% target band.
Madan Sabnavis, chief economist at Bank of Baroda, is of the view that the MPC will continue to hike rates, though by a lesser magnitude.
“The RBI will introduce monetary policy against the backdrop of slowing GDP growth as well as inflation above 6 per cent. We believe the MPC will continue to hike rates this time, although the magnitude will be lower – perhaps 25- 35 bps,” the officer told ANI.
Sabnavis in particular believes that the terminal repo rate for the financial year is expected to remain at 6.5 per cent, which essentially means that there will be another rate hike in the February meeting.
“This is unlikely to change the stance and the withdrawal of liquidity will continue. While the RBI will keep a close watch on both the GDP and inflation estimates, there could be some downward revision for GDP growth. In short, there will be no upside for the market.” Surprising, as is the case for global markets, which are now expecting a more modest hike in interest rates by the Fed,” he was quoted by ANI.
Earlier, the central bank raised the key policy rate by 190 basis points to 5.9% from May to cool domestic retail inflation, which has remained above the RBI’s upper tolerance limit for three quarters now. The retail inflation rate in October was 6.77 per cent.
According to economists polled by Reuters, the central bank will likely hike Rate of interest by a tiny 35 basis points, 6.25 percent. Last three times RBI has increased rates by 50 bps.
The Reserve Bank of India (RBI) will present its next bi-monthly policy review on December 7 at the end of the three-day meeting of the MPC.
(With ANI inputs)
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