On May 4, the RBI hiked rates by 0.40 per cent, and Governor Shaktikanta Das has already called a rate hike at the forthcoming review as a “no brainer” given the pressure to maintain its core mandate of inflation in the targeted band of under 6 per cent.
Mumbai: The Reserve Bank’s Monetary Policy Committee (MPC) is set to begin its three-day meeting on Monday to decide the next monetary policy in the backdrop of high inflation that showing no signs of abatement and evolving geo-political situation. The central bank is likely to again hike the benchmark lending rate in quick succession in its forthcoming monetary policy review that is scheduled to be announced on Wednesday,8 June, a hint for which has already been given by RBI Governor Shaktikanta Das, according to experts
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A recent report by a foreign brokerage BofA Securities claimed that RBI is likely again hike the repo rate by 0.40 per cent at its upcoming deliberation. The central bank, on May 4, hiked repo rates by 0.40 per cent after an off-cycle MPC meeting. Given the pressure to maintain its core mandate of inflation in the targeted band of under 6 per cent, RBI Governor has already called a rate hike at the forthcoming review as a “no brainer”
The retail inflation, which RBI factors in 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 on account of surging commodity prices, including fuel, due to ongoing Russia-Ukraine war. The wholesale price-based inflation has also 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”.
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In view of the soring inflation, experts are speculating more hikes in repo rate in the coming months. Quoting Madan Sabnavis, Chief Economist, Bank of Baroda, NDTV reported that 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 was reported as saying.
In past two months, the government has taken several steps to curb the rising inflation 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.
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, according to NDTV report.
“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.
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.
