with a three-day meeting of RBI’s Monetary Policy Committee (MPC) has started to review the interest rates in the country from Monday, all eyes are on how much the Reserve Bank… India (RBI) raised interest rates this time as economists have given a wide range of expectations ranging from 25 basis points to 50 basis points. Experts say that apart from the rate hike action, it will be interesting to see the central bank’s projections on inflation and growth for this year. The policy decision of the MPC will be announced on June 8, the last day of the meeting.
inflation projection
In its monetary policy review in April, the Reserve Bank of India (RBI) revised its upward retail inflation forecast 5.7 per cent for the current fiscal year 2022-23, from 4.5 per cent estimated earlier. Its governor Shaktikanta Das had said the central bank raised its CPI inflation forecast in the face of “increased geopolitical tensions from the end of February”, however, upheld the earlier narrative and kept the inflation forecast for the year. outlook has been reduced to a great extent.
Suvodip Rakshit, Senior Economist, Kotak Institutional Equities, said, “RBI will now revise its inflation projections upwards, possibly indicating inflation to remain close to 7 per cent for the most part of CY2022. We expect RBI to hold on to inflation. Will continue to remain focused and signal its intention to raise rates and normalize liquidity, while not giving up on growth completely given the uneven nature of the recovery.”
growth forecast
the central bank had reduced GDP forecast 7.2 per cent in April’s monetary policy for the current fiscal year 2022-23, compared to 7.8 projected in the previous bi-monthly policy statement in February. Das had said that real GDP is expected to grow by 16.2 per cent in the first quarter and 6.2 per cent in the second quarter, 4.1 per cent in the third quarter and 4 per cent in the fourth quarter of FY23.
Bank of Baroda Chief Economist Madan Sabnavis has said that the loan policy to be announced will be important from the perspective of not only rate action but also RBI’s views on growth and inflation.
“We see that the RBI MPC revises its inflation forecast (and) retains the growth forecast,” BofA Securities said.
Rate hike in policy review
According to experts, in the ongoing bi-monthly monetary policy review, the MPC is expected to raise rates by anywhere between 25 basis points and 50 basis points. Crisil’s Chief Economist DK Joshi expects a 50 basis points hike in the repo rate in the upcoming MPC policy review, while Bank of Baroda Chief Economist Madan Sabnavis said the MPC may decide to hike the rate by 25-35 basis points. .
Vinod Nair, Head (Research) Geojit Financial Services expects RBI to hike the key repo rate by 25-35 basis points.
Retail inflation stood at an eight-year high of 7.79 per cent in April, forcing the RBI to hike interest rates in an off-cycle monetary policy in May.
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