The RBI may raise the repo rate to 6 percent by the end of this year. Experts have said that it will be raised gradually and not all at once.
The Reserve Bank of India on Friday hiked the repo rate by 0.5 percent in a move to curb inflation in India. It has increased the repo rate for the third time in the current financial year. It has raised 1.4 percent so far. Currently the repo rate has risen to 5.40 percent. The monetary policy committee meeting in September and December is likely to raise the repo rate further.
Nomura economist Sonal Verma said, “Our view is that repo may rise to 6 percent. We expect a 35 basis point hike at the next meeting in September and another 25 basis point hike in December.”
Kotak Mahindra Bank said it expects the repo rate to be hiked to 6 percent from 5.75 percent and expects the RBI to continue its repo rate hikes as a countermeasure to Indian rupee stability and high inflation.
The Indian rupee is down 6.9 percent against the US dollar so far, hitting a high of 80 in July. RBI has pegged retail inflation at 6.7 percent for the current fiscal.
The country’s retail inflation eased to 7.01% in June from an eight-year low of 7.79% in April, but remains above the RBI’s limit of 6%. Inflation figures for July are due next Friday.
Yes Bank has said it expects rate hikes by 25 basis points each in the next two meetings. As global growth slows, monetary policy tightening is gradually increased.
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