RBI to hike repo rate between 30-50 bps on August 5: Citizens' MPC

Reserve Bank's Monetary Policy Committee will meet on August 5 to discuss the macro-economic reading of the country and decide on the inevitable lending rate (also known as repo rate) hike.

As usual, CNBC-TV18's own Citizens' Monetary Committee — Samiran Chakraborty, Chief Economist, India at Citi; Pronab Sen, Former Chief Statistician; Sajjid Chinoy, Chief India Economist at JPMorgan; Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India and Sonal Varma, MD & Chief Economist at Nomura India — have voted and they believe that a 30-50 bps rate hike is on the cards.

The United States Federal Reserve on Wednesday announced that it is increasing interest rates by 75 basis points, or 0.75 percent, in its continued bid to combat inflation and it might unleash another 100 bps hike this year.

It is widely believed that the Indian central bank will also have to hike rates to keep up with the fight and align itself to global rates.

“Certainly, I think inflation will persist and the cause of factor in this case for the persistence is going to be the fact that the global situation is so dicey. As far as inflation is concerned, I agree with the other panellists, I think we have seen the worst of it. But regaining our target of 4 percent I think, is very, very far away, as of now,” said Pronab Sen.

Fears of a recession are also growing and a Bloomberg survey has said predicted that the US has a 42 percent chance of it hitting its economy.

“Recession and inflation are alternating almost every fortnight so it is very difficult for MPC at this juncture, to have a strong view on whether the global economy is going to go into recession at what point of time and to what extent this recession will be able to bring down inflation particularly global commodity prices or not,” said Samiran Chakraborty.

The current situation is probably indicating a stagflation situation.

“We clearly have a substantial slowing of growth, whether that culminates in recession remains to be seen, our expectation is Europe will go into recession later this year,” Sajjid Chinoy.