RBI’s Monetary Policy Committee may hike policy rate by 25-35 bps: Experts

Chennai: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) may hike the repo rate between 25-35 basis points (bps) in its upcoming meeting, said experts.

“We expect a 35 bps rate hike in the upcoming meeting. The Consumer Price Index (CPI) inflation is likely to moderate further in the coming months and slip below six per cent by the end of the fiscal year,” Rajani Sinha, Chief Economist, CARE Ratings told IANS.

She also said the Wholesale Price Index (WPI) has also fallen sharply from 16 per cent in May/June to around eight per cent.

“The fall in global commodity prices comes as a big relief. However, the concern is that core inflation in India still remains high above six per cent. Food inflation and specifically cereal inflation is also high,” Sinha pointed out.

This, in turn, will put upward pressure on household inflationary expectations which is already at a high of around 10 per cent. Hence, while there is some reprieve on the inflation front, RBI would remain vigilant, she added.

There are chances of the US Federal Reserve also moderating its pace of rate hike and that would also provide some breathing space to other Central banks, including RBI.

On the growth front, high frequency economic indicators like auto sales, GST collection, e-way bill, PMI continue to indicate healthy recovery. However, some consumption indicators like IIP consumer durables and non-durables remain weak, Sinha said.

Moreover, external demand is weakening as the global economy slows down.

“RBI would be very cautious so as to not hike more than required as real interest rate enters the positive territory. The Central Bank would also like to give more time to see the effectiveness of the monetary policy tightening so far,” she added.

Expecting a rate hike of 25-35 bps as inflation is well above six per cent, Madan Sabnavis, Chief Economist, Bank of Baroda told IANS: “Inflation unlikely to come below six per cent till March.”

“Having orchestrated a little more than two-and-a-half per cent move in the overnight operative rate through policy rate hikes and liquidity unwind measures, monetary policy committee (MPC) can now afford to embark on baby steps from here on,” said Radhavi Deshpande, Joint President & Chief Investment Officer, Kotak Mahindra Life Insurance Company.

Incremental momentum in inflation is showing signs of moderation owing to falling commodity prices amidst global growth slowdown.

“Hence MPC focus can shift to assessing the lagged impact of past policy actions. We expect a 25 bps in the coming policy and a data dependent stance going forward,” Despande said.

According to Churchil Bhatt, Executive Vice President & Debt Fund Manager, Kotak Mahindra Life Insurance Company there are early signs of inflation peaking as a result of sharp monetary tightening witnessed in the recent past.

Since monetary policy acts with a lag, the MPC may want to take a bit of a breather in its fight against inflation to assess the impact of past policy actions, Bhatt said.

Expecting a 25 bps policy rate hike, Bhatt said the MPC may also hint at the likelihood of a subsequent pause in monetary tightening, especially if CPI inflation continues its downward trajectory in coming months.

“However, a pause in policy tightening, if any, should not be interpreted as a promise of a Pivot just yet,” Bhatt said.


Narrower-deficit forecast in Budget underscores govt’s long-term fiscal sustainability: Moody’s

New Delhi: Global ratings agency Moody's Investors Service said on Wednesday that the narrower fiscal deficit forecast in the Union Budget for 2023-24 underscores the government's commitment to longer-term fiscal...

EVs to get cheaper, Centre proposes Customs duty exemption on batteries

New Delhi: The Central government on Wednesday said that to further provide impetus to green mobility, Customs duty exemption is being extended to the import of capital goods and machinery...

Budget cuts MGNREGA allocation by 30% to Rs 61,032 crore for 2023-24

New Delhi:  The government has slashed the budgetary allocation for rural job guarantee scheme, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) by 30 per cent to Rs 61,032.65...

Mixed response to Budget 2023-24 at the bourses

Mumbai:  The Indian stock markets on Wednesday opened on a positive note and went up after Finance Minister Nirmala Sitharaman presented the Union Budget for FY24 but then came down....

New tax regime may not be necessarily beneficial for all taxpayers: Experts

New Delhi: The new tax regime (NTR) will now be considered as a default regime, but it may not necessarily be a better option for all the taxpayers, experts said....

Budget: BJP has cheated the people of Bihar again, says Tejaswi

  Patna: Bihar Deputy Chief Minister Tejashwi Yadav on Wednesday that the BJP has cheated the people of Bihar again through the Union Budget 2023-24. He also said that the...

‘Step-motherly treatment to Delhi yet again’: Kejriwal slams Budget

New Delhi: Delhiites have been meted out "step-motherly treatment yet again", Chief Minister Arvind Kejriwal said while reacting to the Union Budget 2023-24 presented by Finance Minister Nirmala Sitharaman on...

Insurance policies where premium is above Rs 5L no more tax exempt

  New Delhi: Insurance policies where the premium is over Rs 5 lakh will no longer be tax exempt, as per the provisions in the Union Budget 2023-24. Kapil Mehta,...

Economic growth to slide to 7% in 2022-23 against 8.7% in 2021-22: Fiscal policy statement

New Delhi : Economic growth is expected to slide in the current fiscal, even as India is among the bright spots in the prevailing global scenario marred by fluid geopolitical...

Budget 2023: Under pressure, a good balancing act

Diptendra Raychaudhuri New Delhi: It was expected to be a tough steer between the demands of the people who will decide the fate of Narendra Modi next year and the...

Govt announces Customs duty cuts on goods other than textiles, agriculture

New Delhi : Union Finance Minister Nirmala Sitharaman during her Budget speech on Wednesday proposed to reduce the number of Basic Customs Duty (BCD) rates on goods other than textiles...

Budget Relief: No tax for income up to Rs 7L in new tax regime

New Delhi : The income in personal income tax is expected to raise disposable incomes and transition the taxpayers to the new tax regime. Suman Chowdhury, Executive Director & Chief...

Read Previous

‘Bharat Jodo Library to make idea of India a living principle’

Read Next

1971 Dhaka debacle was ‘military failure’, says Bilawal Bhutto

Leave a Reply

Your email address will not be published.

WP2Social Auto Publish Powered By : XYZScripts.com