Oct 7 (Reuters) – The Indian central bank raised its benchmark repo rate INREPO=ECI by 25 basis points to 5.5% on Wednesday, marking the first rise in nearly four years amid mounting inflation and strong economic growth. DHIRAJ NIM, ECONOMIST AND FX STRATEGIST, ANZ RESEARCH, MUMBAI
“This is a clean and effective policy indicating that repo rate will likely go higher. But how high, will depend upon the second-order inflation impact. We expect two more hikes at the least.” SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“The RBI began its rate-hiking cycle in lockstep with the turn in the interest rates higher by global central banks. The decision to change the stance to calibrated tightening signals that today’s rate hike is the beginning of a rate-hiking cycle over the coming months. We expect another 50 to 75 bps rate hikes over the coming months.”
“In the event that the West Asia conflict lingers on and oil prices remain elevated, the inflation risk could increase further, necessitating a more aggressive tightening cycle.”
KRISHNA BHIMAVARAPU, APAC ECONOMIST, STATE STREET INVESTMENT MANAGEMENT, BENGALURU
“The RBI has taken a sensible first step with a 25-bps hike. Our base case remains for a 100 bps of cumulative tightening over this cycle, although the ultimate magnitude will depend on how the global energy shock, food inflation, broader inflation dynamics and the global tightening cycle evolve in the coming quarters.”
“If food, energy and electricity inflation begin reinforcing each other, the RBI may ultimately need to deliver significantly more tightening than today’s move alone.” SACHCHIDANAND SHUKLA, GROUP CHIEF ECONOMIST, LARSEN & TOUBRO, MUMBAI
“(The) 25-bps (hike) was largely priced in, but the change in stance shows a de facto commitment to hike even if food or crude prices reverse.” RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“The RBI’s October hike acknowledges that cyclical inflation risks are no longer benign. A change in stance also underscored the RBI MPC’s hawkish intent. Against a backdrop of elevated oil prices, tighter global conditions, and risks to food inflation from unfavourable weather, policymakers have chosen to reinforce inflation credibility before risks become entrenched.”
GARIMA KAPOOR, DEPUTY HEAD OF RESEARCH AND ECONOMIST, ELARA SECURITIES, MUMBAI
“Continuing commodity price pressures are likely to put upside pressure on inflation, as growth remains resilient, allowing quick pass-through of input prices to retail prices. The rising interest rate backdrop globally has also reduced RBI’s degrees of freedom. We see (a) likelihood of another 50 bps (of) hike(s) this cycle.”
(Reporting by Kashish Tandon and Bharath Rajeswaran; Compiled by Dhanya Skariachan; Editing by Ronojoy Mazumdar)
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