Mumbai. A few days after the increase in interest rates by the US central bank Federal Reserve, the Reserve Bank of India (RBI) can also increase the repo rate by 0.25 to 0.35 percent. Experts believe that the RBI may increase the repo rate in the upcoming monetary policy review meeting to curb inflation.
Monetary review meeting to be held from August 3 to 5
The central bank has already announced a gradual withdrawal of its soft monetary stance. The three-day bi-monthly meeting of the Reserve Bank’s Monetary Policy Committee (MPC) is starting from August 3. The results of the meeting will be announced on August 5.
In May and June, the repo rate was increased by 0.40 percent and 0.50 percent respectively.
Retail inflation has remained above the Reserve Bank’s satisfactory level of 6 per cent for six months. In such a situation, the Reserve Bank had increased the repo rate by 0.40 percent and 0.50 percent respectively in May and June. Experts believe that the central bank will take the key policy rate this week to at least pre-pandemic levels. It will increase further in the coming months.
RBI will gradually tighten its stance
The BofA Global Research report said, “We believe that the MPC will increase the repo rate by 0.35 percent on August 5. At the same time, it will gradually tighten its stance.” The report said that the possibility of an aggressive 0.50 per cent increase in the repo rate or some soft 0.25 per cent increase also cannot be ruled out.
RBI may increase interest rates more before the stipulated time
A report by Bank of Baroda said that the Federal Reserve has increased interest rates by 2.25 percent in the calendar year 2022. Due to this there is a possibility that the Reserve Bank may also increase the interest rates more before the stipulated time. The report says, “However, given the circumstances in India, there is no need for an aggressive approach right now.”
No need to aggressively raise interest rates
Housing.com Group CEO Dhruv Aggarwal said that banking regulators of other countries of the world including the US are aggressively raising interest rates. But the situation is not like this in India. There is no need to aggressively raise interest rates here. He said that we estimate that the central bank will increase interest rates by 0.20 to 0.25 percent.
Radhika Rao, executive director and senior economist, DBS Group Research, said in a report that the monetary policy committee of the Reserve Bank will focus on price stability over the next two quarters. In such a situation, we believe that in August, MPC will increase the repo rate by 0.35 percent.
The Reserve Bank of India takes into account inflation based on the Consumer Price Index while deciding the policy stance. Retail inflation has remained above 6 per cent since January 2022. In June, it was at the level of 7.01 percent.
FIRST PUBLISHED : July 31, 2022, 16:06 IST