Key Points
India's central bank is likely to raise the cost of funds by a quarter percentage point this week, perhaps for the last time in the current cycle of rate hardening, as sticky local inflation and the West's hawkish stance outweigh growth concerns spawned by a cumulative 250-basis point (bps) rate increase in less than 11 months...
Nine of 10 economists polled by ET ahead of Thursday's policy announcement expect a 25-bps increase..
Economists at Goldman Sachs expect inflation for January-March 2023 to be 50 basis points higher than 5.7% projected by the Reserve Bank of India (RBI) in its February policy, and an upside risk to food inflation might not allow easing in price pressures...
Deutsche Bank India economist Kaushik Das said RBI is most likely to increase rates and also retain its withdrawal of an accommodative stance, "arguing that real rates (repo rate - CPI inflation) are barely positive, with CPI inflation currently being close to 6.50%."..
"India's real policy rate is set to hover around 100 basis points in three to six months, while maintaining a policy rate differential of about 150 basis points with the US," he said.. "In the current EBLR (external benchmark linked lending rate) regime of immediate and fuller passthrough of repo rate hikes to lending rates, one expects the central bank to go slow after 250 basis points of rate hikes during the year..
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