RBI expected to hike interest rates by 35 basis points after MPC meeting

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RBI expected to hike interest rates by 35 basis points after MPC meeting

RBI monetary policy committee meeting: Reserve Bank of India RBI is expected to hike repo rate by 35 basis points after its monetary policy committee MPC meeting on Wednesday. According to a Reuters poll, the MPC expects to hike the policy rate from 5.90 per cent as inflation is above the central bank's tolerance band, 2 -- 6 per cent.

Retail inflation fell to 6.77 per cent in October, down from 7.41 per cent in September and 7 per cent in August. Madhavi Arora, lead economist at Emkay Global Financial Services, said that food inflation was higher than expected because of the unseasonal rains.

The RBI has raised rates by cumulative 190 basis points since April 2022, and investors are expecting two more hikes.

Rating agency Fitch said that the RBI expects to raise policy rates to 6.15 per cent in December and hold the rate through 2023. The RBI has intervened to support the rupee and further rate rises are likely to support the currency and to curb inflationary pressure. We expect the RBI to increase policy rates to 6.15 per cent by December and then hold that rate throughout 2023, it noted.

The impact of past rate hikes and tighter measures is yet to be seen. Pankaj Pathak, fixed income fund manager at Quantum AMC said that the RBI will be more data-dependent and reactive going forward than raising rates pre-emptively.

In India, monetary policy tightening and high inflation rates have resulted in a slowdown in imports, an easing of personal loan growth and low purchasing power, according to Fitch. The demand for capital goods is affected by tighter financial market conditions, according to the agency.

Economic resilience is reflected in the upbeat labour market conditions with unemployment easing and labour participation improving, Fitch said.