The reflection of a security guard is seen next to the Reserve Bank Of India (RBI) logo at the RBI headquarters in Mumbai. File | photo credit: Reuters
Under pressure to lower retail price inflation and keep pace with global peers, the Reserve Bank could opt for a 25 basis point hike in the benchmark interest rate, likely the last of the tightening cycle. current monetary policy which began in May 2022, to the political bi-monthly which will be unveiled on April 6, 2023.
The Reserve Bank’s Monetary Policy Committee (MPC) will meet for three days on April 3, 5 and 6 to consider various domestic and global factors before releasing the first bi-weekly monetary policy for the 2023-24 fiscal year.
The Reserve Bank of India (RBI) has already raised the repo rate by a total of 250 basis points since May in a bid to contain inflation, although it has remained above the comfort zone of the central bank by 6% most of the time. .
The two key factors on which the committee headed by the Governor of the RBI will deliberate intensively while firming up the next monetary policy are – the high retail price inflation and the recent actions taken by the central banks of the developed countries, in particular the US Federal Reserve, European Central Bank and Bank of England. .
Having remained below 6% for two months (November and December 2022), retail price inflation has breached the comfort zone warranting action by the Reserve Bank.
Inflation based on the consumer price index (CPI) was 6.52% in January and 6.44% in February.
“I’m leaning towards another and final rate hike of 0.25 percentage points,” Axis Bank chief economist Saugata Bhattacharya told reporters recently, adding that the hike would stubbornly tame underlying inflation. high.
He also said the slowing growth currently visible in anecdotal evidence, coupled with some slowing inflation, should prompt the six-member monetary policy committee to cut rates by the end of the third quarter. of exercise 24.
“Given that CPI inflation has been 6.5% and 6.4% over the past two months and liquidity is now close to neutral, we can expect the RBI to rise rates again by 25bps and likely shifting stance to neutral to signal this cycle is over,” Madan Sabnavis, chief economist at Bank of Baroda, recently said.
In total, the Reserve Bank will hold six MPC meetings in the 2023-24 fiscal year.
The central government has instructed the RBI to ensure that retail price inflation remains at 4% with a margin of 2% on either side.