Another RBI Rate Hike Coming, Say Experts Ahead Of MPC Meeting

With inflation showing no signs of abatement, the Reserve Bank is likely to increase the benchmark lending rate in quick succession in its forthcoming monetary policy review on Wednesday, a hint for which has already been given by Governor Shaktikanta Das, opined experts..There are speculations that the central bank may go for at least a 35 basis points (bps) hike over and above the 40 bps hike effected last month after an off-cycle Monetary Policy Committee (MPC) meeting..Experts are expecting more hikes in repo rate in the coming months..Governor Das-headed MPC will meet for three days beginning Monday. The governor will announce the decision taken during the meeting on Wednesday..The retail inflation, which RBI factors 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, mainly because of surging commodity prices, including fuel, due to the ongoing Russia-Ukraine war..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..Recently in a TV interview, the governor said that the "expectation of rate hike is a no-brainer, there will be some increase in the repo rates, but by how much I will not be able to tell now but to say that 5.15 may not be very accurate"..On expectation from the MPC, Madan Sabnavis, Chief Economist, Bank of Baroda, said the credit policy to be announced would be important from the point of view of rate action and the RBI's thoughts on growth and inflation.."The increase in repo rate can be taken as almost given, but the quantum may not be more than 25-35 bps as the earlier minutes of the meeting held in May indicated that the MPC was not in favour of a large increase in repo rate at one shot," Sabnavis said..The government has taken several steps, including a duty cut on motor fuel, a reduction in import duty on certain edible oils, and banning the export of wheat to arrest runaway inflation..In a report, BofA Securities said it expects RBI MPC to raise the repo rate by 40 bps in June and 35 bps in August.."We see the RBI MPC revise their inflation forecast higher, retain growth estimate, and focus on withdrawal of accommodation," it added..On what he expects from the rate-setting panel, Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com & Makaan.com, said the RBI is expected to increase the repo rate again to contain inflation which is largely being driven by global factors such as the Ukraine war.."At this juncture, we can understand the compulsion of the RBI to raise interest rates. However, the hike should be gradual as it could impact the growth of the real estate sector, which is a major driver of the economy," he said..Rakesh Kaul, the CEO at Clix Capital, said the June MPC meeting is certainly expected to see a rate hike, with only the quantum in question.."Unfortunately, with a twin deficit –- in both fiscal and current account-- persistent and rising inflation, as well as the Federal Reserve increasing rates and likely to continue tightening, the only way out for RBI is to raise the interest rates," he said..The government has tasked the Reserve Bank to ensure consumer price index-based inflation remains at 4 per cent with a margin of two per cent on either side.

Another RBI Rate Hike Coming, Say Experts Ahead Of MPC Meeting

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