Association’s three-day meeting RBI’s Monetary Policy Committee is going on and the result will be announced on the last day of the meeting on Wednesday (June 8). While experts are giving various estimates as to how much the RBI may raise the key repo rate, a Moneycontrol poll of 15 economists has shown that the rate-setting panel is likely to raise the interest rate. repo rate 40 basis points increase for the second time in five weeks.
In a recent interview, RBI Governor Shaktikanta Das “Expectation of rate hike is unreasonable. There will be some increase in the repo rate but by how much, I will not be able to tell now.
According to a Moneycontrol report, while the mean of economists’ predictions point to a 40-basis-point rate hike to 4.80 per cent from June 8, they were far from unanimous in their expectation of the quantum of the MPC rate hike. Announcement with estimates ranging from 25 basis points to at least 50 basis points. One basis point is one hundredth of a percentile.
It said the rate hike appears to be subject to Morgan Stanley’s prediction of 50 consecutive basis points increases in June 8 and early August.
what do economists say
Deloitte India economist Rumki Majumdar said the RBI will likely hike policy rates in view of higher inflationary pressures, currency depreciation, rising imports and the monetary policy situation in major countries except China. During this recovery phase RBI will have to bite the bullet and lay more emphasis on sustainability than growth objectives.
Yes Bank Chief Economist Indranil Pan said, “We see the RBI extending the repo hike by 40bps in May to 35bps in June, followed by 25bps each in August and September. By this time, we expect global growth to moderate enough to prop up commodity prices and thus give some rest to the domestic inflation cycle.
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. In the April MPC meeting, the RBI revised its retail inflation forecast for the current fiscal year 2022-23 to 5.7 per cent, from 4.5 per cent estimated earlier.
The off-cycle rate hike has fueled expectations of front-loading of rate hike decisions by the RBI, said Lakshmi Iyer, chief investment officer (debt) and head (product), Kotak Mahindra Asset Management Company. As the US is still not dependent on moderation in the pace and volume of rate hikes, and inflation does not show signs of an immediate moderation, it appears to be another slam dunk decision to hike rates in the upcoming policy.
“The quantum of rate hike (in our view 40-50 bps) will be a major determinant in extrapolating the terminal repo rate for FY2023. Although aggressive tightening has already been relaxed by bond markets, the policy stance remains to be considered. Will continue to be of importance towards bond yields,” Iyer said.
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