(Bloomberg) -- The Reserve Bank of India is set to lift its benchmark interest rate by another quarter-point to tame inflation that accelerated faster than expected last month, according to a Bloomberg survey of economists.
The central bank is expected to hike the repurchase rate to 6.75% between April-June, before easing to the current level of 6.5% in the fourth quarter, the survey showed. A previous poll had forecast the rate to remain at a peak of 6.5% until the first quarter of next year.
Elevated inflation prints and relatively resilient high frequency indicators prompted the rate hike at its April meeting, said Teresa John, an economist at Nirmal Bang Equities Pvt., adding that high real interest rates may weigh on the economy with a lag, which consequently raises the possibility of rate cuts in December 2023 and beyond.
Headline consumer prices have fallen below 7% from September last year, but unexpectedly surged above the RBI's 6% target ceiling in January. Economists have now raised their price-growth outlook to 6.1% from 5.65% in this quarter, with annual forecasts raised slightly to 6.6%.
Inflation forecasts have been revised up due to the ongoing momentum in cereal inflation, elevated global commodity prices and sticky core inflation, according to Sakshi Gupta, principal economist at HDFC Bank Ltd. “Moreover, there could be some upside risks to this forecast if monsoon rains are below normal if El Nino weather conditions materialize this year.”
The Indian economy is seen expanding 4.7% in the October-December quarter of 2022, and 6.9% in the financial year ending March 2023.
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