Following RBI Governor Shaktikanta Das' 'off-cycle' repo rate hike on Wednesday, more hikes are probable in the next Monetary Policy Committee meetings, SBI's research paper Ecowrap showed. As per SBI Ecowrap, repo rate hikes are also predicted in June and August, bringing the total rate hike in FY23 to 75 basis points.

This follows the RBI's announcement of a 40 basis point repo rate hike, bringing the benchmark interest rate to 4.40 percent. This is the first-rate hike since August 2018 and the first time the MPC has increased the repo rate without warning. From May 21, the MPC increased the CRR (cash reserve ratio) by 50 basis points to 4.5 percent.

The rate cycle has turned around, and the RBI is expected to keep raising rates until they reach the pre-pandemic level of 5.15 percent by March 2023, according to the article. It noted that the CRR increase "would impose further upward pressure on borrowing rates while draining system liquidity by Rs 87,000 crore."

According to the SBI research, these moves put the broader markets on pins and needles. "The sinking reality that inflationary fears were non-transitory has prompted nearly all central banks to take hasty steps toward charting a new route, one that is more geared at stopping the accommodative posture while sucking the flowing liquidity unleashed during the pandemic," it added.

It went on to say that the US Federal Reserve has taken one of the most aggressive postures in recent memory by announcing hefty rate hikes to contain soaring prices - the highest in four decades. "EU countries are steadfastly gearing in to step up the throttle," it added.

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