Tuesday, December 6, 2022
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RBI Likely To Hike Policy Interest Rates Today

Mumbai (Maharashtra): The Reserve Bank of India (RBI) is likely to hike the policy repo rate by 40 basis points to 4.80 per cent on Wednesday and increase the inflation forecast for the current fiscal to above 6 per cent from its earlier projection of 5.7 per cent, according to market analysts and economists.

The six-member Monetary Policy Committee (MPC) of the RBI is certain to hike the policy interest rates as inflation has remained above the central bank’s tolerance limit for the past several months. In a recent interview, RBI Governor Das said that the expectation of rate hikes in June is a “no-brainer”.

While the rate hike is certain, as RBI Governor Shaktikanta Das had indicated last month, the question remains on by how much?

“We expect the RBI to hike repo rate by 40 bps in the June policy meeting. However, we should be open for a rate hike between 35-50 bps hinging on how the MPC wants to reach the pre-pandemic repo rate of 5.15 per cent or around that mark by the end of August policy,” said Suvodeep Rakshit, Senior Economist at Kotak Institutional Equities.

Last month, in its off-cycle monetary policy review the central bank hiked the policy repo rate by 40 basis points or 0.40 per cent to 4.4 per cent. This was the first increase in the policy repo rate in nearly two years. The repo rate is the interest rate at which the RBI lends short-term funds to banks.

Inflation has been above the RBI’s 2-6 per cent target band since the beginning of this year.

As per the latest available data, India’s Consumer Price Index (CPI) based inflation surged to an eight-year high of 7.79 per cent in April. It has been above 6 per cent since January 2022.



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