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RBI MPC meeting announcements today: Another rate hike on the cards?

RBI MPC meeting announcements today: Another rate hike on the cards?

While most economists expect a rate hike, they differ on the size of the hike. The predictions range from 25-50 bps.

RBI MPC today: Another repo rate hike likely? RBI MPC today: Another repo rate hike likely?

The Reserve Bank of India will announce the outcome of its latest Monetary Policy Committee meeting on Friday. Most experts believe that the MPC will go for another round of rate hikes. In the last meeting on June 8, the RBI increased repo rate by 50 basis points to 4.90 per cent. 

Higher repo rates would mean that the cost of home and personal loans would go up. Car and two-wheeler loans, education loans will also get dearer. 

Adhil Shetty, CEO, Bankbazaar.com told Business Today, "The global geopolitical situation and the elevated commodity prices indicate that inflation will likely remain above the upper tolerance level of 6 per cent through the first three quarters of 2022-23. The RBI may announce a hike of 30-50 basis points in its monetary policy meeting this week to pacify the rising inflation.”

According to Reuters, while most economists expect a rate hike, they differ on the size of the hike. The predictions range from 25-50 bps. Most – 40 per cent – expect the RBI to go for a 50 bps hike, taking the repo rate to 5.40 per cent, more than a quarter expect a 35 bps hike, and 22 per cent expect a 25 bps hike. 

Kaushik Das, Chief Economist at Deutsche Bank, said, "The RBI can always reduce the pace of rate hikes from September onwards if inflation and growth momentum softens, but we think it is a risky strategy at this stage to be an outlier in delivering less than 50 bp rate hikes."

Axis Bank chief economist Saugata Bhattacharya said the MPC is likely to hike the key repo rate by 0.35-0.50 per cent. A hike of such a quantum will take the repo rate beyond the 5.15 per cent level, at which the RBI had begun the ultra-accommodative measures in the face of the COVID-19 pandemic, he told reporters.

A BofA Global Research report said, "We now expect the RBI MPC to raise the policy repo rate by 35 bps on August 5 and change stance to calibrated tightening.” It, however, did not rule out the possibility of an aggressive 50 bps and a measured 25 bps hike. 

However, a Bank of Baroda research report said that an aggressive rate hike by the Federal Reserve is feeding expectations that the RBI may also front load its rate hikes. "...in the absence of any fresh shocks, India's inflation trajectory is likely to evolve in line with the RBI's projections. Hence, we expect that the RBI may hike rates by only 25 bps in Aug'22, followed by another 25 bps rate hikes in the next two meetings," it said.

(With agency inputs)

Also read: RBI's MPC meet: Third straight hike in interest rates likely; here's what to expect

Also read: RBI to hike key interest rates in August but no consensus on size