RBI MPC: Economists expect a rate hike of 50 bps

Another round of rate hikes is likely to be announced by the Reserve Bank of India (RBI), which will present the conclusions of the Monetary Policy Committee meeting today. In fact, a significant number of analysts and economists think that the RBI would probably announce a 50 basis point increase in the repo rate.

Since May, the central bank has raised the repo rate three times, bringing it to its present level of 5.40 percent. The repo rate will rise by another 50 basis points to 5.90 percent if that happens.

Retail inflation, which increased from 6.71 percent in July to 7.01 percent in August, was taken into consideration when determining the rate increase. To put things in perspective, the MPC's inflation objective is 4 percent with a 6 percent upper tolerance band.

In addition to rising inflation, US Fed interest rates have increased from 1 percent in May to a high of 3.25  percent in just five months. The new goal for December 2022 is 4 percent. The US wants to reduce retail inflation, which is currently at 8 percent, to a goal rate of 2 percent.

Given the said information, economists anticipate a 50 basis point rate increase in today's announcements.

As per general conscientiousness, the majority of respondents think the RBI would raise interest rates by 50 basis points. The majority of respondents across several channels, including Twitter (72.5 percent), Linkedin (57 percent) YouTube (58 percent) and Instagram (29 percent) supported a potential rate increase of 50 basis points. Some predict no increase at all, while others predict a rise of 25 to 35 bps.

Soumya Kanti Ghosh, group chief economist at SBI, stated that a half-point increase in the repo rate seemed "imminent," but that he anticipates a 35 bps rate increase in the December policy announcements.

The RBI may boost interest rates by 50 basis points in response to global indications, according to Nirmal Jain, founder and chairman of IIFL.

Tanvee Gupta-Jain, the head economist at UBS Securities India, too forecast a rate increase of 50 basis points. Jain attributed the increases to a significant current account deficit, a high Consumer Price Index (CPI), and a precarious fiscal condition.

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