Stubborn inflation forced RBI to take a tough stand, another hike in repo rate fixed
reserve bank
With no signs of moderation in inflation, the Reserve Bank of India (RBI) is likely to hike policy rates further in its upcoming monetary policy review on Wednesday. Experts speculated that Governor Shaktikanta Das has already indicated this. The central bank had last month hiked the repo rate by 0.40 per cent in the unscheduled Monetary Policy Committee (MPC) meeting. There is speculation that rates may go up by at least 0.35 per cent further in this review. Experts are predicting a further hike in the repo rate in the coming months.
Monetary committee meeting from Monday
The three-day meeting of the MPC headed by Governor Das will begin from Monday. The governor will announce the decisions taken during the meeting on Wednesday. Retail inflation rose for the seventh consecutive month in April to an eight-year high of 7.79 per cent. The main reason for this is the rise in commodity prices, including fuel, due to the Ukraine-Russia war. Inflation based on wholesale prices has remained in double digits for 13 months and touched a record high of 15.08 per cent in April. Das said in a recent TV interview, “There will be some hike in repo rates, but right now I will not be able to tell how much it will be.”
Government cuts duty on fuel
Madan Sabnavis, Chief Economist, Bank of Baroda, said on the MPC meeting that the review is important in terms of the central bank’s views on growth and inflation. “There will be an increase in the repo rate, but it will not exceed 0.25-0.35 per cent as it was indicated in the remarks of the meeting held in May that the MPC was not in favor of a large hike in the repo rate,” he said. The government has taken several steps to control inflation, including reduction in duty on petrol and diesel, reduction in import duty on some edible oils and ban on export of wheat. BofA Securities said in a report that it expects the RBI to hike the repo rate by 0.40 per cent in June and 0.35 per cent in August.
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