According to a majority of economists polled by Reuters, the Reserve Bank of India will follow up its surprise rate hike in May with another raise at its meeting next month, with the scale of the move being extremely split.
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.
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, and not in 2023 as originally expected, due to the abrupt shift in views on increasing inflation and how to control it.
In a recent Reuters survey, 14 of 53 analysts predicted the RBI will raise rates by 35 basis points to 4.75 percent next month, while 20 predicted a greater increase of 40-75 basis points, including 10 who predicted a hike of 50 basis points. At the June 6-8 meeting, twelve respondents predicted a small rate hike (10 to 25 basis points), while seven predicted no change.
The RBI is expected to enhance its inflation forecast for the current fiscal year and consider raising interest rates during the meeting, according to a source familiar with the events.
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