RBI is expected to deliver 25 bps hike on Apr 6: Economists

The Reserve Bank may go for a final 25 basis points increase in the current rate hike cycle next week, said economists at Axis Bank

Mumbai: The Reserve Bank may go for a final 25 basis points increase in the current rate hike cycle next week and a reduction would come in only by the end of the third quarter of FY24, economists at Axis Bank said on Wednesday. As per media reports, RBI officials met economists on Tuesday, and the latter has suggested the central bank will go for a 25 basis points hike in key rates.

RBI hiked rates by 250 basis points

Since May 2022, the RBI has hiked rates by 250 basis points, hurting borrowers and some are already concerned about loan tenors extending beyond their working lives as a result of the hikes. The RBI has been hiking rates with an eye to tame inflation, which mostly remained beyond the upper tolerance limit of six percent.

'Hike will tame high core inflation'

"I am leaning towards a further and final 0.25 percentage point hike in rates," Chief Economist at Axis Bank Saugata Bhattacharya said, adding that the hike will tame the stubbornly high core inflation. He also said the slowdown in growth visible in anecdotal evidence at present, coupled with some cool-down in inflation, should prompt the six-member Monetary Policy Committee to cut rates by the end of the third quarter of FY24.

Real GDP growth estimated at 6%: Bhattacharya

Bhattacharya also noted that it is too early to change the "withdrawal of accommodation" stance of the RBI and that some tweaks can be expected in the way it is communicated at the next review on April 6. The RBI will shift the stance to "neutral" in the June review, he said. He said that there is anecdotal evidence pointing to signs of a slowdown in growth, which makes him peg the FY24 real GDP growth estimate at 6 percent, much below the RBI's own estimate of 6.4 percent.

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