In June, the RBI will hike rates again, but it is uncertain by how much: Poll

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The RBI would most likely raise the repo rate, which is currently at 4.40 percent, to at least its pre-pandemic level next quarter, rather than 2023 as originally expected, due to increased inflation. BENGALURU: According to a majority of economists, the Reserve Bank of India will follow up its rate hike in May , another raise in the coming month.

In April, India’s retail inflation surged to an eight-year high, staying beyond the central bank‘s tolerance limit for the fourth month in a row, and is expected to continue high. In a recent survey, some analysts predicted the RBI will raise rates by 35 basis points to 4.75 percent next month, on the other hand some predicted a greater rise of 40-75 basis points.

Despite so much discussion on how the RBI would respond to its unannounced 40 basis point rate cut on May 4 demonstrates the difficulty analysts face difficulties to see the direction of what to expect next. “We really need to see the second act in June  to see what to accept in the future” and,” Markets are certain on one account,” said Upasna Bhardwaj, economist.

The Federal Reserve of the United States, for example, is expected to raise rates by 50 basis points at its upcoming meetings, following a similar move earlier this month. The repo rate is expected to rebound to 5.15 percent next quarter, according to nearly a third of those polled. According to a person familiar with the discussion, the RBI is expected to raise its inflationary projection for the current fiscal year and consider boosting interest rates.

Interest rates were predicted to grow much more by the end of 2022, reaching 5.40 percent or more. While the rest felt there was a slim to no possibility. “The RBI’s communications should have been a lot better…this kind of sudden action clearly does not assist with policy credibility,” Tuuli McCully, Scotiabank’s Asia-Pacific economics director, said.

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