NEW DELHI: Morgan Stanley anticipates the RBI to begin policy normalisation at the April MPC meeting, with a 15-20 basis point (bps) raise in the reverse repo rate to normalise the policy rate corridor.

This is in the context of both domestic and international events. Higher commodity prices, fueled by escalating geopolitical tensions and the hawkish tilt of key global central banks, would certainly have an impact on MPC debates as India's growth begins to show indications of long-term recovery.

In addition, Morgan Stanley expects inflation to remain over the top limit of the RBI's inflation goal band for the next few months before slowing to roughly 5.5 percent in 4Q22. As a result, we predict the RBI to raise the reverse repo rate in April, followed by a repo rate hike in June, for a total increase of 125 basis points in F2023, according to the international brokerage.

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