The Reserve Bank of India (RBI) governor Shaktikanta Das will announce the bi-monthly monetary policy on December 7. It will be the last monetary policy committee (MPC) announcement in 2022. So far this calendar year, the repo rate has been hiked by 190 basis points from 4.4 per cent in May to 5.9 per cent in September.
After an initial rate hike of 40 basis points on May 4, the RBI has hiked the repo rate by 50 basis points thrice, on June 8, August 5 and September 30.
The repo rate is hiked to reduce the demand in the economy and bring inflation down. Due to rate hikes, retail inflation in India has softened from 7.79 per cent in April to 6.77 per cent in October.
However, it may also slow down economic activity in the economy. So, the RBI has to balance the rate hikes.
In the upcoming MPC announcement, RBI is expected to hike the repo rate by 35 basis points, experts told Business Standard.
“Given that the past rate hikes are now having an impact in terms of slowing of economic activity, it would be prudent to raise rate hikes by a lesser magnitude than in the past. We expect a 35 basis point rate hike in the MPC announcement tomorrow,” Vivek Iyer, partner at Grant Thornton Bharat, said.
“Amidst signs of easing inflation and economic growth tapering, there is an expectation that the MPC will go for a moderate interest rate hike to the tune of 25-35 basis points,” Manish P Hingar, founder at Fintoo, said.
“We believe that 6.25 per cent could be the terminal rate for now,” he added.
Jyoti Prakash Gadia, managing director at Resurgent India, said that the rate hike is likely to be lower than the previous rate hike of 50 basis points.
“The Indian economy is showing mixed signals emerging from the current scenario and the RBI is expected to continue its efforts to control inflation for which a hike in the repo rate is expected by 30 to 35 basis points in the forthcoming review,” Gadia said.
RBI governor Shaktikanta Das will announce the rate hike at 10 AM on December 7.