In its fight against soaring inflation, the Reserve Bank of India (RBI) raised the repo rate by 50 basis points to 4.90 percent on Wednesday. As widely expected. The rate increase follows an out-of-cycle increase last month. The RBI slashed the repo rate in March 2020 to mitigate the impact of a covid-induced lockdown, and kept the benchmark interest rate unchanged for nearly two years before raising it on May 4, 2022.
RBI expected to change inflation forecast
“We do expect the RBI to change its inflation forecast by 70-80bps. From 5.7% earlier citing the change in global and domestic price pressures. Although the growth forecast is expected to be kept unchanged at 7.2% for FY23″.: HDFC Bank Treasury Research Team
“Not an easy job for the central banker. Recently released GDP data showed a sliding y-o-y growth for private consumption expenditure. An indication that economic activity remains slow. On the other hand, the inflation surprise has brought to the fore the need for the RBI to tighten monetary policy. The government has also joined the RBI in an attempt to contain inflationary pressures in the economy. We see the RBI extending its 40bps repo hike of May with a 35bps increase in June, followed by 25bps each in August and September,” said Indranil Pan, chief economist at Yes Bank.