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RBI meet begins amid rate hike talk
RBI's rate-setting panel MPC on Monday began its three-day deliberation amid expectations of another round of hike in benchmark interest rates to contain inflation that continues to remain above the central bank's upper tolerance level.
Mumbai: The RBI's rate-setting panel MPC on Monday began its three-day deliberation amid expectations of another round of hike in benchmark interest rates to contain inflation that continues to remain above the central bank's upper tolerance level.
RBI Governor Shaktikanta Das will announce the decision of the Monetary Policy Committee after deliberations on Wednesday.
Das has already indicated that there may another hike in the repo rate, though he refrained from quantifying it. There are speculations that the central bank may go for at least 35 basis points (bps) hike over and above the 40 bps hike effected last month after an off-cycle MPC meeting.
Market experts are estimating a bigger hike in interest rate as consumer price index (CPI) based retail inflation, which the Reserve Bank of India factors in while arriving at its monetary policy, galloped for a seventh straight month to touch an 8-year high of 7.79 per cent in April. Inflation is rising mainly on account of surging commodity prices, including fuel.
The ongoing Russia-Ukraine war has further pushed up commodity prices across the globe. The wholesale price-based inflation has remained in double digits for 13 months and touched a record high of 15.08 per cent in April. Stressing that a "back-to-back rate hike is imminent in June policy", SBI's Economic Research Department in a report said during 2022 so far, more than 45 central banks across AEs and EMEs have raised policy interest rates and/or scaled back liquidity, with many central banks hiked interest rates in back-to-back policies.
On expectations from the MPC Shanti Ekambaram, Group President, Consumer Banking, Kotak Mahindra Bank, said the MPC has signalled a gradual withdrawal of accommodation in light of higher inflation. "I expect a rate hike between 35-50 basis points in the June policy. Based on inflation data and external factors, including oil and commodity prices, expect a total of 100 to 150 bps increase in repo rate from the current 4.4 per cent," she said.
