Tuesday, November 5, 2024

RBI Is Likely To Increase Benchmark Interest Rate! By 25 Basis Points

At its bimonthly policy announcement on Thursday, the RBI may increase the benchmark interest rate by 25 basis points. This would be the likely final increase in the current cycle of monetary tightening, which began in May 2022 in response to pressure to lower retail inflation and keep up with other developed nations.

RBI

The Central Bank’s Monetary Policy Committee (MPC)

will meet for three days on April 3, 5, and 6 to discuss various domestic and international concerns before releasing the first bi-monthly monetary policy for the fiscal 2023–24 year. Even though inflation has mostly remained over the central bank’s comfort zone of 6 percent, the Reserve Bank of India (RBI) has already increased the repo rate by a total of 250 basis points since May in an effort to curb it.

RBI

High retail inflation and recent actions by developed country

central banks, particularly the US Federal Reserve, the European Central Bank, and the Bank of England will be the two main factors on which the RBI Governor-led committee will focus its deliberations when determining the next monetary policy.

RBI

Retail inflation broke the Reserve Bank’s comfort zone

after remaining below six percent for two consecutive months (November and December 2022). Inflation measured by the Consumer Price Index (CPI) was 6.52 percent in January and 6.44 percent in February.

RBI

Saugata Bhattacharya, the chief economist at Axis Bank,

recently told reporters, “I am leaning towards a further and final 0.25 percentage point hike in rates,” adding that the increase will bring down the stubbornly high core inflation. Also, he said that the six members of the Monetary Policy Committee should cut interest rates by the end of the third quarter of FY24 as a result of the existing anecdotal evidence of sluggish growth and some cooling in inflation.

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