The RBI’s Monetary Policy Committee (MPC), which will meet for three days on next week to decide on the interest rates in the country, is expected to go in for a 25 basis points hike in its bi-monthly monetary policy to be announced on April 6. The RBI has been consecutively raising the key repo rate since May 2022.
The Monetary Policy Committee (MPC) of the Reserve Bank will be meeting for three days on April 3, 5 and 6 to take into account various domestic and global factors before coming out with the first bi-monthly monetary policy for fiscal 2023-24.
Economists at Axis Bank said the Reserve Bank may go for a final 25 basis points increase in the current rate hike cycle next week and a reduction would come in only by the end of third quarter of FY24.
“I am leaning towards a further and final 0.25 percentage point hike in rates,” Chief Economist at Axis Bank Saugata Bhattacharya told reporters, adding that the hike will tame the stubbornly high core inflation.
Madan Sabnavis, chief economist at Bank of Baroda, said, “Given that CPI inflation has been 6.5 per cent and 6.4 per cent in the last two months and that liquidity is now near neutral, we may expect the RBI to raise rates once again by 25 bps and probably change stance to neutral to signal that this cycle is over.”
India Ratings and Research Chief Economist D K Pant also expects the central bank to raise policy rate by 25 bps (basis points). “This is likely to be last rate hike in present policy tightening cycle,” he said, and added that inflation trajectory from here is going to decline due to impact of past policy rate hikes, softening of global commodity prices, and base effect.
Meanwhile, Ranen Banerjee, Partner, Economic Advisory Services, PwC India, said that the risk of dis-anchoring the inflation expectations by going for a pause owing to the banking turmoil has forced the US Fed, ECB and BoE to raise the policy rates. The speech of US Fed chair clearly articulates that there is going to be less hawkishness going forward.
The case for disengagement of the Indian monetary policy moves with the US Fed has become stronger and the probability of a pause by the RBI on rate hikes has increased, he said.
“Given that inflation in India is more from supply side factors, as dissented by two of the MPC members in the last MPC meeting, we could possibly now have a majority of MPC members voting for a pause,” Banerjee said.
The central government has tasked the RBI to ensure that retail inflation remains at 4 per cent with a margin of 2 per cent on the either side.
Since May 2022, the RBI has hiked rates by 250 basis points, hurting borrowers and some are already concerned about loan tenors extending beyond their working lives as a result of the hikes. In its last policy meeting held in February, RBI had raised the policy rate or repo by 25 basis points to 6.50 per cent.
Having remained below six per cent for two months (November and December 2022), the retail inflation breached the comfort zone warranting action by the Reserve Bank.
The Consumer Price Index (CPI)-based inflation was 6.52 per cent in January and 6.44 per cent in February.
(With Inputs From Agencies)
Read all the Latest Business News here
Comments
0 comment