Economists expect more rate hikes as CPI inflation hits 8-year high
With the consumer price index (CPI) inflation touching an eight year high of 7.8 per cent in April 2022, experts foresee rapid rate hikes during rest of the fiscal. Barclays chief India economist Rahul Bajoria expects the latest reading of inflation to put pressure on the Reserve Bank of India (RBI) to further raise rates as much as 50 basis points (bps) in the upcoming June monetary policy committee (MPC) meeting and then slow the cycle in August to 25 bps hike. ICRA’s chief economist Aditi Nayar foresees a high likelihood that the MPC will raise the repo rate by 40 bps and 35 bps, respectively, over the next two policies to 5.15 per cent. She continues to see the terminal rate at 5.5 per cent by the middle of 2023. Emkay Global Financial Services’ lead economist Madhavi Arora is of the view that the MPC may front-load rates by another 25 bps-40 bps. She expects the terminal rate to be around or a tad higher than 5.50 per cent. Estimating inflation to trend above six per cent in 2022-23, Kotak Institutional Equities’ senior economist Suvodeep Rakshit said that the RBI may hike repo rate by 35-40 bps along with 50 bps hike in cash reserve ratio (CRR).
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