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RBI MPC: Experts say interest will grow in the coming months

RBI MPC: Experts say interest will grow in the coming months

Experts say RBI is expected to make inflation management its key priority, which could include steps to curb aggregate demand

The RBI Monetary Policy Committee (MPC) raised the repo rate in a recent policy review to control high inflation in the country. RBI Governor Shaktikanta Das, concerned about rising inflation, said on Wednesday that in the first three quarters of 2022-2023 it was likely to remain above the 6 percent high tolerance band. Experts now believe that the MPC will increase further in the coming months and the repo rate is likely to be 5.75 percent at the end of the current fiscal year.

MPC decided to increase the key repo rate by 50 basis points to 4.90 percent. It has also decided to continue to focus on withdrawing accommodation to ensure that inflation remains within target in the future while supporting growth. 

Barclays (India) chief economist Rahul Bajoria said: "Based on (Wednesday's) measures, we think that if the inflation outlook does not improve and the risks of a slowdown do not arise, we think that the RBI will continue its trajectory with rising rates and policies. rate to 5.25 percent up 35 basis points at its next meeting in August.

He added that at the next three meetings (August, October and December), the RBI is expected to make inflation management a top priority, including measures to reduce aggregate demand.

"In terms of succession, we now expect the RBI to raise rates by 35 basis points in August and then raise the policy level by 25 basis points to 5.50 percent in October, while also moving to a neutral stance. In addition, we expect the RBI to increase further rates to 5.75 percent in December, which we now believe will mark the end of the cycle, ”Bajoria said.

The RBI also revised more than 100 benchmarks to estimate retail inflation at 6.7 percent for the current fiscal year 2022-2023, compared with 5.7 percent previously planned. Retail inflation in April reached an eight-year high of 7.79 percent. However, the central bank has a mandate to keep it at 2-6 percent.

Rajni Thakur, chief economist at RBL Bank, said: macrodynamics. and a smaller increase then pushed the repo rate to 6 percent at the end of the year.

Sunil Kumar Sinha, chief economist at India Ratings and Research, says that in the ongoing conflict between Russia and Ukraine, the possibility of a cooling of rising world commodity prices and supply-side disruptions to the end does not seem possible. deadline at all.

"Given an RBI inflation projection of 7.5 percent in 1QFY23, 7.4 percent in 2QFY23, 6.2 percent in 3QFY23 and 5.8 percent in 4QFY23, Ind-Ra believes there is room for further increases in Ra-50 in "FY23 and FY23 repo rates can climb up to 6 percent in this cycle," added Sinha.

Amar Ambani, director of Institutional Equities at YES Securities, said that in terms of monetary policy rates, the priority given to fighting inflation is paving the way for further rate increases, with the repo rate close to 5.75% at the end of the fiscal year 23. 

Chief Economist Kotak Institutional Equities Suvodeep Rakshit said that the policy of June is to continue the policy cycle focusing exclusively on inflation, that the RBI decision to increase the repo rate to 50 bps if the inflation rate rises to about 100 bps in line with market expectations.

"The policy stance remains hawkish and we expect the RBI to continue the repo rate to guarantee a neutral to slightly positive level of real policy. We expect the repo rate to increase by 35 basis points in August policy to 5.25 percent and the repo rate to 5.75 percent at the end of fiscal 2023.

We also expect another 50 basis points to increase the CRR (money reserve ratio) to 5 percent at the end of fiscal 2023 to move liquidity conditions to pre-pandemic levels, ”Rakshit ta added. 

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