Although many market participants anticipate that the Reserve Bank of India (RBI) will implement one more 25-basis-point hike before a prolonged pause, State Bank of India (SBI) Research anticipates that rates will remain unchanged.
According to SBI Research’s most recent Ecowrap study, the central bank is anticipated to halt its interest rate rise, and the current repo rate of 6.5% may be the final rate for now.
In the current fiscal year, the RBI has hiked the repo rate by 250 basis points to 6.50 percent. Repo rate refers to the rate of interest at which the central bank loans money to all commercial banks.
The next meeting of the RBI’s monetary policy committee is slated for the first week of April 2023.
“The (RBI’s) stance could continue to be withdrawal of accommodation, even as liquidity is now in deficit mode. RBI can always keep the options open in June (monetary) policy,” the report authored by Group Chief Economic Adviser Soumya Kanti Ghosh noted.
According to the article, the RBI has sufficient grounds to halt the repo rate rise at its April meeting.
‘RBI should pause, think about decoupling from Fed’
The senior economic advisor for the SBI group had previously said that the RBI should “wait and reflect” on whether it can continue to replicate the US Federal Reserve’s rate rises “stroke by stroke” or decouple from the US central bank.
Ghosh said at a conference organised by the Bharat Chamber of Commerce in Kolkata that he does not foresee a near-term conclusion to the Fed’s rate-hiking cycle, which argues that the RBI should consider decoupling.
“My point is can we match the Fed stroke by stroke? At some point of time we need to pause and think whether the impact of the earlier rate hikes (by the RBI) has percolated down into the system… I don’t see any end to the Fed’s cycle soon, it could be three or more rate hikes going ahead,” he stated.