With retail inflation above the comfort level of 6 per cent and most global peers including the US Fed continuing their hawkish stance, the Reserve Bank of India may go in for a 25 basis points hike in the bi-monthly monetary policy to be announced on April 6, according to experts.
The Monetary Policy Committee MPC of the Reserve Bank will be meeting on April 3, 5 and 6 for three days to take into account various domestic and global factors before coming out with the first bimonthly monetary policy for fiscal 2023 -- 24.
The committee will deliberate intensively while firming up the next monetary policy are elevated retail inflation and the recent actions taken by central banks of developed nations, particularly the US Federal Reserve, European Central Bank and Bank of England.
The Reserve Bank of India RBI has been raising benchmark rates since May 2022 in order to contain inflation, which has been largely driven by external factors, including the disruption of the global supply chain after the outbreak of the Russia-Ukraine war.
In its last policy meeting in February, RBI raised the policy rate or repo by 25 basis points to 6.50 per cent.
He said that the case for disengagement of the Indian monetary policy moves with the US Fed has become stronger and the probability of a pause by the RBI on rate hikes has increased.
Two of the MPC members dissented about the fact that India's inflation is more from supply-side factors, we could have a majority of MPC members voting for a pause, Banerjee said.
In fiscal 2023 -- 24 the Reserve Bank will hold six MPC meetings.
The RBI has asked the RBI to make sure retail inflation stays at 4 per cent with a margin of 2 per cent on either side.
Suvodeep Rakshit, senior economist at Kotak Institutional Equities, said the RBI had been hawkish in the last policy and has always highlighted concerns on elevated core and headline CPI inflation, despite expectations from the April MPC meeting.
The RBI is likely to hike the repo rate by 25bps in April due to the fact that the Fed, BoE and theECB are sticking to their expected rate hike path, according to Rakshit.
The RBI Governor Shaktikanta Das said that despite the multiple shocks to the global economy from the Pandemic, the Ukraine war and synchronised monetary policy tightening across the world, the domestic economy and financial sector are stable and the worst of inflation is behind us.