Money & Banking

Our Bureau | Mumbai, June 8 | Updated on: Jun 08, 2022

More rate hikes likely this fiscal, say experts

The rate hike of 50 basis points by the Reserve Bank of India underlines its focus on cooling inflationary pressures, bankers believe. However, the policy has continued to support growth.

“RBI policy is on the expected lines. The 50 basis point increase in repo rate in this policy brings the repo rate at 4.90 per cent. Even at this level, it is below the pre-pandemic repo rate of 5.15 per cent,” said AK Goel, Chairman, Indian Banks’ Association (IBA), and Managing Director and CEO, Punjab National Bank.

“Considering the fact that inflation is hardening, it is essential to control inflation at the desired level,” he further said.

Dinesh Khara, Chairman, State Bank of India, noted that uncertain times demand unconventional measures.  “The policy statement is a comprehensive assessment of uncertainties and is an affirmation of coordinated policy action by the government and RBI to thwart the dangers of inflation,” he said.

Atanu Kumar Das, MD and CEO, Bank of India, said the policy announcement is on expected lines, reflecting the central banker’s continued focus on a non-disruptive trade off between growth and price stability, in a calibrated manner.

Zarin Daruwala, Cluster CEO, India and South Asia markets (Bangladesh, Nepal and Sri Lanka), Standard Chartered Bank, said the MPC’s unanimous vote on the 50-basis points repo rate hike is a clear indication of its resolve to rein in inflation.

“While the MPC has prioritised policy and withdrawal of accommodation, its steps are likely to be measured as the domestic economy recovers. It was heartening to note that capacity utilisation has improved to 74.5 per cent and that GDP growth has been retained at 7.2 per cent,” she said.

Ashu Khullar, Citi India CEO said the RBI’s decisive and continued commitment to manage inflation further builds upon India’s resilience amidst the global headwinds.

“India’s growth path will be nurtured through these calibrated policies, opening up many opportunities on the way,” said Khullar.

More rate hikes

Experts believe there are likely to be more repo rate hikes in the year depending on how inflatonary pressures play out.

Crisil said it expects the RBI to raise rates by another 75 basis points this fiscal, bringing repo rate 50 bps above the pre-pandemic level by end-fiscal.

“The hikes will be front-loaded this year, given heightened inflationary pressures at present, it said.

“How aggressively the RBI proceeds with future rate hikes will depend on the persistence of cost pressures. The RBI could hike the repo rate by another 60 to 80 basis points through the rest of the year,” said Moody’s Analytics in a noted, adding that these rate increases will need to be carefully calibrated to meet the central bank’s increasingly difficult objectives of supporting growth and taming inflation.

Published on June 08, 2022