Axis Bank sees final rate hike in April

The stronger than expected real GDP growth in the third quarter may prompt RBI to continue the status quo on policy rate. Economists believe the easing cycle may not begin before October. Rate cuts are unlikely, but RBI's communication on liquidity is important.

All 40 economists in a Bloomberg survey forecast the Indian central bank will keep the repurchase rate unchanged at 6.50%.

The Monetary Policy Committee also decided by a 5:1 majority to remain focused on "withdrawal of accommodation."

RBI Governor Shaktikanta Das said the central bank’s successive policy rate hikes, a reference to increases in interest rates, “seems to be working”

The RBI has been hiking rates with an eye to tame inflation, which mostly remained beyond the upper tolerance limit of 6 per cent. I am leaning towards a further and final 0.25 percentage point hike in rates, Chief Economist at Axis Bank Saugata Bhattacharya told reporters, adding that the hike will tame the stubbornly high core inflation.

The MPC, which will detail its next policy statement at the end of its three-day meeting on December 8, is seen keeping the repo rate unchanged at 6.50% while retaining its stance of withdrawal of accommodation, an ET poll of 10 economists showed. After raising the repo rate by 250 basis points (2.5 percentage points) from May 2022 to February 2023, the committee has maintained a pause on the benchmark rate, which is the rate at which the RBI lends to banks.

India's Monetary Policy Committee keeps the benchmark repo rate unchanged at 6.5% in a unanimous decision.

Nine of 10 economists polled by ET ahead of Thursday's policy announcement expect a 25-bps increase. This week's rate action is expected to be followed by a prolonged pause, with some respondents anticipating no further rate action for the remainder of FY24.

The Reserve Bank of India is expected to announce a rate hike on April 6, following a review of its monetary policy. The central bank has raised the repo rate, the rate at which it lends to banks, by a cumulative 250 basis points since May 2022, and Thursday's announcement could be the second hike of the calendar year.

The review by the six-member MPC led by Das will likely indicate the course RBI will adopt in the remainder of the financial year as it seeks to strike a fine balance between maintaining growth and keeping inflation under control amid high crude oil prices and surging US bond yields.