RBI Seen To Keep Raising Repo Rate At Next Two MPC Meetings
(Bloomberg) -- The Reserve Bank of India may sustain its monetary tightening although at slower tempo to achieve a neutral rate of interest, according to Madhavi Arora, an economist at Emkay Global Financial Services Ltd.
“We still have 50 to 60 basis points of rate hikes to go for them to be able to reach a neutral level of real rates,” Arora said in an interview with Haslinda Amin and Rishaad Salamat on Friday.
The repurchase rate, currently at 5.9%, has to rise to about 6.5% to hit a positive real rate of about 1 percentage point against an inflation rate estimated at 5.5% by March 2023, according to Arora.
While India's rate has returned to pre-pandemic levels after 190 basis points of increases since May, it's still below inflation of 7.41% in September. The RBI will probably go for a front-loaded increase in December then a smaller hike in February, said Arora.
Still, India's central bank won't move in lockstep with the Federal Reserve that has raised the key rate by 75 basis points for a fourth straight time this week even as it signaled that the tightening path may soon involve smaller hikes.
“Emulating the fed could cost the economy,” Arora said, adding that the RBI isn't going to get too restrictive.
On the rupee that has declined over 11% this year, Arora said that trying to protect the local currency was a “lost battle” for the central bank. A weak rupee works as an “automatic stabilizer” for the economy, she said, as it cools demand for imported products.
--With assistance from .
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
-
Navigating Energy Crossroads: S Jaishankar's Call For Diversified Supply Chains At G20 Ministerial Meeting
As geopolitical fault lines continue to test maritime trade routes and commodity flows, Jaishankar's message remains pertinent: true economic resilience requires open markets, protected transit lines, and a genuine commitment to multilateral cooperation rather than coercion.
-
Indians Are Travelling, But Not Every Journey Is A Holiday | The Week In Whys
Pilgrims, patients and working women are the real travellers, and the system hasn't quite caught up with them.
-
Getting To Work Costs Women More | The Reason Why
It is not just about women paying more than men. It is about women paying much more in cities than in villages.
-
AI Bias In Investing Cannot Be Eliminated, But It Can Be Governed
Framing is a particularly important example as identical financial information presented in terms of gains rather than losses can lead an LLM to reach a different assessment.
-
Joining The Dots | Dark Skies, Steady Diya: Why Hope Holds This Diwali
With war, a weak rupee and foreign outflows weighing on sentiment, policymakers at the NDTV World Summit and market veterans at NDTV Profit Ignite: Diwali Edition offered the same advice: stay invested and filter out the noise.
-
The Curious Case of Equitas Small Finance Bank And A CEO Who Quit For Stock
PN Vasudevan believes persistent investor concerns over a perceived conflict of interest had become a governance overhang on Equitas Small Finance Bank's stock, even as the lender improved profitability and asset quality.
-
Talking Points This Week: AI Cash Burn, A Tiger Comeback And An India That Still Finds Its Own Path
India is not immune to higher oil or tighter global liquidity, yet its earnings base is broader, its domestic policy levers are still available.
-
Foreign Investors Own Half Of HDFC Bank and ICICI Bank. An LTCG Cut Could Matter Most Here
Foreign portfolio investors have US$115 billion parked in HDFC Bank, ICICI Bank. If the government cuts long-term capital gains tax, Jefferies says returning foreign money could land here first.
