Bank of India announces Rate Hike
2022.12.07 02:51
Bank of India announces Rate Hike
Budrigannews.com – As inflation remains above its tolerance band, the Reserve Bank of India (RBI) is widely expected to raise its key lending rate by 35 basis points on Wednesday. However, markets will look to the RBI’s outlook on growth and prices for direction.
In a Reuters poll, a strong two-thirds majority said that the central bank should still keep an eye on inflation, which slowed to 6.77 percent in October but has remained above the upper end of the RBI’s tolerance band of 2-4 percent all year.
Economists stated that the central bank’s outlook, which will accompany the rate decision, will be an important indicator of future policy changes. India’s retail inflation India’s retail inflation
Domestic prices have not yet been affected by a decline in global prices over the past few months. has dropped in six of the last seven months and was trading at around $83 a barrel, down from its March peak of $139.
According to Yes Bank’s chief economist, Indranil Pan, “Though global oil prices are lower, pump prices in India have not changed and remain at the same levels since May 2022 and unless pump prices come down, it won’t have any direct implications for domestic inflation.”
The RBI’s Monetary Policy Committee predicted retail inflation of 6.7% and GDP growth of 7% for the 2022/23 financial year (April-March) in its most recent policy statement on Sept. 30.
It stated that its projections were based on the assumption that the Indian crude oil basket would cost approximately $100 a barrel on average during the second half of the year, but that could change if prices fall.
Madan Sabnavis, chief economist at Bank of Baroda, stated, “We will wait and watch as oil dynamics are not straightforward and can change at any time.”
Sabnavis pointed out that even though global oil prices have decreased, the government has not relaxed duties or taxes. As a result, Sabnavis does not anticipate the RBI lowering its inflation forecast. As a result, the consumer has not benefited from falling oil prices and continues to pay the same price.”
India’s trade and current account balances, as well as its currency and inflation, are directly impacted by global crude prices, which account for more than two-thirds of the country’s oil requirements.
Food prices that are higher than anticipated may also counterbalance lower oil prices.
“Food expansion has been surprisingly high because of unseasonal rains and removed the expansion advantage,” said Madhavi Arora, lead market analyst at Emkay Worldwide Monetary Administrations.
Since its first unannounced mid-meeting rate increase in May, the RBI has increased rates by a total of 190 basis points, and investors anticipate at least two more rate increases during the current cycle, including the one on Wednesday.
“It remains to be seen how past liquidity tightening and rate hikes will affect the economy. According to Pankaj Pathak, manager of Quantum’s fixed income fund (NASDAQ:), “We expect the RBI to be more data-dependent and reactive going forward than raising rates preemptively.” AMC.
