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RBI MPC 2022: Central bank likely to hike repo rate again to stem inflation

RBI MPC 2022: Central bank likely to hike repo rate again to stem inflation

RBI MPC meet 2022: The MPC is expected to hike the policy rate from 5.90 per cent currently as inflation is above the central bank’s tolerance band, 2-6 per cent.

RBI rate hike: The RBI has raised rates by cumulative 190 basis points since April 2022 and investors are expecting at least two more hikes.  RBI rate hike: The RBI has raised rates by cumulative 190 basis points since April 2022 and investors are expecting at least two more hikes. 

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

Retail inflation stood at 6.77 per cent in October, down from 7.41 per cent in September and 7 per cent in August.  "Food inflation has been higher than expected on account of unseasonal rains and took away the inflation advantage," said Madhavi Arora, lead economist at Emkay Global Financial Services.

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

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

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

Fitch further mentioned that in India, monetary policy tightening and high inflation rates have led to a slowdown in imports, an easing in personal loan growth, and low purchasing power. The agency added tighter financial market conditions are also impacting the demand for capital goods, a leading investment indicator.

"That said, economic resilience is reflected in upbeat labour market conditions with unemployment easing and labour participation improving," Fitch said.

(With agency inputs)

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Published on: Dec 07, 2022, 8:47 AM IST
Posted by: Mehak Agarwal, Dec 07, 2022, 8:42 AM IST