Mumbai: Days after the US Fed raised interest rates, reserve Bank of India Experts said policy rates may be hiked by 25-35 basis points for the third time in a row to check high retail inflation.
The central bank has already announced a gradual withdrawal of its accommodative monetary policy stance.
Reserve BankRating Panel of – monetary policy committee Will meet for three days on August 3 to deliberate on the current economic situation and announce its bi-monthly review on Friday.
With retail inflation staying above 6 per cent for six months, the RBI raised the short-term lending rate (repo) twice – by 40 basis points in May and 50 basis points in June.
The current repo rate of 4.9 per cent is still below the pre-covid level of 5.15 per cent. The central bank sharply reduced the benchmark rate in 2020 to deal with the crisis triggered by the outbreak of the pandemic.
Experts believe that reserve Bank of India (RBI) will raise the benchmark rate this week to at least pre-pandemic levels and further in the subsequent months.
“We now expect the RBI MPC to raise the policy repo rate by 35 bps on August 5 and change the stance to a calibrated tightening,” the BofA Global Research report said.
The possibility of an aggressive 50 bps and 25 bps growth also cannot be ruled out, it added.
A research report by Bank of Baroda states that federal Reserve Rate hiked by 225 bps in CY22, RBI hikes repo rate by 90 bps. An aggressive rate hike by the Fed is feeding hopes that the RBI may extend its rate hikes as well.
However, the conditions in India do not guarantee an aggressive stance by the RBI.
“… There may be another 25 bps. Increase in rates in the next two sittings,” it said.
The government has tasked the Reserve Bank to ensure that the CPI-based inflation remains at 4 per cent with a difference of two per cent on either side.
Housing.com Group CEO Dhruv Agarwal said that while other banking regulators around the world, including the US Fed, are aggressively raising rates, the situation in India does not warrant such an approach yet.
“In our estimate, it is expected to be in the range of 20-25 basis points,” he said.
In a report, Radhika Rao, executive director and senior economist at DBS Group Research, said the RBI’s 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 hike in August, followed by three 25 bps hikes for the terminal rate to close at 6 per cent by the end of FY23”, he said. Told.
Retail inflation based on the Consumer Price Index (CPI), which the RBI factors into when it comes to its monetary policy, is above 6 per cent since January 2022. It was 7.01 percent in June. PTI nkd cs
The central bank has already announced a gradual withdrawal of its accommodative monetary policy stance.
Reserve BankRating Panel of – monetary policy committee Will meet for three days on August 3 to deliberate on the current economic situation and announce its bi-monthly review on Friday.
With retail inflation staying above 6 per cent for six months, the RBI raised the short-term lending rate (repo) twice – by 40 basis points in May and 50 basis points in June.
The current repo rate of 4.9 per cent is still below the pre-covid level of 5.15 per cent. The central bank sharply reduced the benchmark rate in 2020 to deal with the crisis triggered by the outbreak of the pandemic.
Experts believe that reserve Bank of India (RBI) will raise the benchmark rate this week to at least pre-pandemic levels and further in the subsequent months.
“We now expect the RBI MPC to raise the policy repo rate by 35 bps on August 5 and change the stance to a calibrated tightening,” the BofA Global Research report said.
The possibility of an aggressive 50 bps and 25 bps growth also cannot be ruled out, it added.
A research report by Bank of Baroda states that federal Reserve Rate hiked by 225 bps in CY22, RBI hikes repo rate by 90 bps. An aggressive rate hike by the Fed is feeding hopes that the RBI may extend its rate hikes as well.
However, the conditions in India do not guarantee an aggressive stance by the RBI.
“… There may be another 25 bps. Increase in rates in the next two sittings,” it said.
The government has tasked the Reserve Bank to ensure that the CPI-based inflation remains at 4 per cent with a difference of two per cent on either side.
Housing.com Group CEO Dhruv Agarwal said that while other banking regulators around the world, including the US Fed, are aggressively raising rates, the situation in India does not warrant such an approach yet.
“In our estimate, it is expected to be in the range of 20-25 basis points,” he said.
In a report, Radhika Rao, executive director and senior economist at DBS Group Research, said the RBI’s 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 hike in August, followed by three 25 bps hikes for the terminal rate to close at 6 per cent by the end of FY23”, he said. Told.
Retail inflation based on the Consumer Price Index (CPI), which the RBI factors into when it comes to its monetary policy, is above 6 per cent since January 2022. It was 7.01 percent in June. PTI nkd cs