Before taking a breather toward the end of the year, India’s monetary policy makers will likely raise interest rates two more times. In the minutes of the Monetary Policy Committee meeting earlier this month, the panel raised the key rate by a half-point to 4.90% to anchor inflationary expectations. As part of this year’s rate panel meeting schedule, the Reserve Bank of India will meet three more times.
After a 40 basis point hike in May, Nomura Holdings Inc. and Barclays Plc expect a 35 basis point hike in August, while Emkay Global Financial Services Ltd. expects a quarter-point hike or more, and Citigroup Inc. expects less than 40 basis points.
It was suggested earlier this month by RBI’s Deputy Governor that the key rate should be at least above the four-quarter inflation forecast of 5.8%. RBI’s Deputy Governor, Ashima Goyal, argued that rates could not be more negative than -1% for a year. This was achieved by hiking rates 50-60 basis points in June, meaning rates almost peaked.
Another rate-setter, Jayanth Varma, advocated for more significant rate increases, claiming that real rates were still very near to their April levels. Shashanka Bhide, another member of the panel, issued a warning about inflation pressure that would last the entire fiscal year.
