Reserve Bank may increase the repo rate by a quarter of a percent: Experts
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Such signs are coming from retail inflation showing signs of softening and the US Federal Reserve slowing the pace of its key interest rate hike. Experts believe that in its bi-monthly monetary policy review this week, the central bank may increase the repo rate marginally by 0.25 percent.
The Reserve Bank of India (RBI) may take a somewhat accommodative stance on interest rate hike in the coming days. Such signs are coming from retail inflation showing signs of softening and the US Federal Reserve slowing the pace of its key interest rate hike. Experts believe that in its bi-monthly monetary policy review this week, the central bank may increase the repo rate marginally by 0.25 percent. The RBI had raised the key interest rate by 0.35 per cent in the December monetary policy review.
Earlier, it was increased by 0.5-0.5 percent for three consecutive times. The RBI has increased the repo rate by a total of 2.25 per cent since May last year to control inflation. This increase was mainly due to the disruption in the global supply chain due to the Russia-Ukraine war. The Monetary Policy Committee (MPC), which sets the RBI’s rate, will begin three days of deliberations on Monday. The decision of the MPC will be pronounced on February 8.
Kotak Institutional Equities said in a report that global inflation is moderating, although the inflation rate is still well above the target of each central bank. According to the report, inflation is likely to moderate further in the next few months. With this, the rate hike phase will end by the first half of 2023. After this, rate cuts may start in late 2023 or early 2024.
The government has entrusted the RBI with the responsibility of keeping inflation at a level of six per cent (two per cent up or down). Inflation remained above 6 per cent for three consecutive quarters from January 2022. There was some relief in November and December 2022. On his expectations from the MPC, Housing.com’s Group CEO (CEO) Dhruv Agarwal said that the RBI would probably stick to a modest increase in the repo rate in the upcoming policy announcement.
He said that in 2023, the rate hike may stop. Amita Vaidya, director of the Mumbai-based Sarla Anil Modi School of Economics, also said that the Monetary Policy Committee may relax some of its tight stance. He said that the negative trend of the global economic scenario is still continuing, but the domestic economy is showing speed and combativeness. He predicted a 0.25 percent increase in the policy rate in the upcoming review.
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