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    Monetary Policy Committee expected to raise repo rate by 25-50 bps in June: CNBCTV-18 Poll

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    Monetary Policy Committee expected to raise repo rate by 25-50 bps in June: CNBCTV-18 Poll


    Half the respondents to a CNBC-TV18 poll expect the repo rate to hike by 50 basis points in June, while the other half expect an increase of around 25 and 50 basis points. The RBI's Monetary Policy Committee is expected to announce its policy decision at 10 am on June 8.

    In RBI Governor Shaktikanta Das’ own words, a rate hike in the coming policy is a “no brainer”, with inflation now running at an eight-year high. The only question, then, is: how much and how fast.
    Speaking to CNBC-TV18 on May 23, Das remarked, “RBI would like to raise the rates in the next few meetings or in the next meeting at least. I myself have said in my minutes that one of the reasons for the off-cycle meeting in May, was that we did not want a much stronger action in June, which is highly avoidable… The expectation of rate hike is a no brainer, there will be some increase in the repo rates, but by how much I will not be able to tell now…”
    Half the respondents to a CNBC-TV18 poll expect a 50 basis points hike in the repo rate in the June 8 policy, and the other half expect an increase of anywhere between 25 and 50 basis points. In short, the majority of 10 economists polled see half a percentage point hike in the repo rate in June itself.
    Eighty percent of the respondents said that by August, repo rate would have been hiked by anywhere between 50-100 basis points, with 40 percent voting for a 50-75 basis points increase, and the other 40 percent for 75-100 basis points hike.
    This would mean that repo rates may go from 4.40 percent currently to around 4.90 percent by June, and to 5.15 percent or higher by August itself.
    By the end of the financial year in March 2023, a third of the respondents to the poll believe the repo rate may touch 5.50 percent and another third 5.75 percent.
    In the current rate hike cycle, rates may peak at 5.50 to 5.75 percent as per the majority, the poll showed. Some economists, however, even believe that the terminal rates may go up all the way to 6.25-6.50 percent.
    Last month the RBI had hiked the cash reserve ratio (CRR) by 50 bps to 4.50 percent, to withdraw Rs 87,000 crores of excess liquidity in the system.
    Economists believe a further hike cannot be ruled out, but for now most expect no change in the CRR.
    Consumer price inflation (CPI), which RBI factors in while arriving at its monetary policy, has been increasing for seven straight months, and is now at an 8-year high of 7.79 per cent. This is mainly on account of surging commodity prices thanks to the ongoing Russia-Ukraine war.
    Seven out of ten economists polled said RBI could raise the average CPI forecast for FY23 to about 6.5 percent from 5.7 percent currently.
    The GDP forecast may be left unchanged at 7.2 percent, given the better than expected Q4 print on the back of a lower base.
    Lastly, the stance. The macroeconomic outlook remains uncertain and inflation remains a concern.
    In this scenario, seventy percent respondents expect RBI to continue with its stance of remaining accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth. Twenty percent said RBI may change its stance to neutral, and the remaining expected it to tweak its stance to ‘calibrated tightening’.
    The Reserve Bank had kept key rates unchanged in its first monetary policy of the year in April. However, due to the evolving inflation-growth dynamics especially in view of the impact of the Russia-Ukraine conflict, the monetary policy committee held an off-cycle meeting between May 2 and 4, 2022 in which it decided to hike the policy repo rate by 40 basis points to 4.40 per cent. This was the first increase in the policy repo rate since May 2020. It also hiked the CRR by 50 basis points.
    The Monetary Policy Committee of the RBI is expected to announce its policy decision at 10 am on June 8.
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