Such signals are coming from retail inflation showing signs of moderating 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 could marginally increase the repo rate by 0.25 percent.
The Reserve Bank of India (RBI) may take a somewhat dovish stance on raising interest rates in the coming days. These signals are coming from retail inflation showing signs of easing and the US Federal Reserve slowing the pace of its key interest rate hike. Experts believe that in its bimonthly review of monetary policy this week, the central bank could marginally increase the repo rate by 0.25 percent. The RBI had raised the key interest rate by 0.35 percent in the December policy review.
Previously, it increased by 0.5-0.5 percent three consecutive times. The RBI has increased the repo rate by a total of 2.25 percent since May last year to control inflation. The increase was mainly due to the disruption in the global supply chain due to the war between Russia and Ukraine. The Monetary Policy Committee (MPC), which sets the RBI 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 each central bank’s target. According to the report, inflation is likely to moderate further in the coming months. With this, the rate hike phase will end in 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 percent (two percent up or down). Inflation has remained above 6% for three consecutive quarters since January 2022. There was some relief in November and December 2022. On his expectations of the MPC, Housing.com Group CEO Dhruv Agarwal , said the RBI would likely keep a modest increase in the repo rate in the next 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 the Monetary Policy Committee may relax some of its tough stance. She said that the negative trend of the world economic scenario continues, but the domestic economy shows speed and combativeness. She predicted a 0.25 percent increase in the policy rate at the next review.
Disclaimer:Prabhasakshi has not edited this news. This news has been published from PTI-language feed.