[ad_1]
After raising the interest rates for the fourth time in a row last week, the Reserve Bank of India (RBI) is likely to further hike the repo rate in December as well, which will again raise EMI on loans. RBI Governor Shaktikanta Das has also said we are in the middle of another “storm” of global monetary tightening. Experts, however, said further rate hikes in India are likely to be in baby steps and will be less aggressive.
The RBI on Friday increased the repo rate by 50 basis points to 5.9 per cent, the fourth-time increase in a row. In the past four subsequent monetary policy reviews since May this year, the RBI’s rate-setting panel has raised 190 basis points in total. The repo rate is the interest rate at which the RBI lends to the commercial bank.
Suvodeep Rakshit, senior economist of Kotak Institutional Equities, said, “We believe that durable liquidity will move towards neutral by the end of FY2023. Overall, we believe that the RBI will be more data-dependent from hereon. We continue to expect another 35-basis point hike in December followed by a pause, with the RBI assessing US Fed actions and the impact of past rate hikes on domestic growth and inflation.”
The retail inflation in the country during August soared to 7 per cent, remaining above the RBI’s upper tolerance limit of 6 per cent for eight straight months. The RBI’s target for CPI-based inflation is 2-6 per cent. The central bank on Friday retained its inflation forecast for the current financial year 2022-23 at 6.7 per cent.
Prerna Singhvi, associate vice-president (economic policy and research) of National Stock Exchange, said, “While the MPC acknowledged moderation in inflationary pressures and retained their FY23 forecast at 6.7 per cent, it recognised the need for continued calibrated monetary policy action to bring down inflation within the target band and anchor inflationary expectations, particularly in the light of persisting global uncertainty.”
Singhvi added that rate hikes are likely to continue, albeit at a tapered pace, to curb the generalisation of price pressures, and would hinge on a confluence of factors including growth-inflation dynamics, US Fed rate hikes and geopolitical risks.
Sunil Kumar Sinha, principal economist at India Ratings and Research, said that although the RBI governor in his statement has ruled out any peak/ terminal policy rate in the current rate hike cycle, Ind-Ra believes it to be around 6.25 – 6.50 per cent under the prevailing macroeconomic conditions, basis retail inflation falling to 5-5.5 per cent during 1QFY24.
India Ratings expects the retail inflation to come in at 6.8 per cent in 2QFY23, 6.3 per cent in 3QFY23, 6.5 per cent in 4QFY23 and average 6.5 per cent in FY23.
“Ind-Ra believes that from here on, further rate hikes, though still a possibility, are likely to be in baby steps and will be more focussed on restraining the broadening of price pressures and/or pre-empt second-round effects. In other words, it is likely to be less aggressive, more data-dependent and focussed on anchoring inflation/inflationary expectation as opposed to the current rate hikes (started in May 2022) which were essentially focussed on aligning the policy rate to surging inflation,” Sinha said.
Read all the Latest Business News and Breaking News here
[ad_2]
Source link
