RBI Preview: Forecasts from five major banks, hiking more to limit second-order effects on CPI

Reserve Bank of India (RBI) meets on Friday, September 30 at 04:30 GMT to discuss interest rates. Here you can find the expectations as forecast by the economists and researchers of five major banks regarding the upcoming central bank's decision. 

The RBI is expected to hike the repo rate by 50 basis points to 5.90%.

ING

“It is likely the Bank will hike its key repo rate by 30 bps to 5.7%. As inflation rose from 6.7% in July to 7% in August, policymakers should continue to feel the pressure and increase repo rates in an attempt to cool the economy.”

ANZ

“We expect the RBI to deliver another 50 bps hike. Our view is based primarily on the US Fed’s hawkish outlook that now signals a much higher terminal fed funds rate. This outlook, combined with renewed USD strength, is a development that is unlikely to escape the policy calculus of the RBI. The bilateral strength of the dollar is becoming increasingly difficult to address via intervention in the FX market. It will likely translate into higher imported inflation. Separately, the RBI will also be providing its revised GDP growth and inflation forecasts. We also expect a paring of their growth forecast for FY23, given a weaker than expected start to the year as well as a softer outlook for global growth.”

Standard Chartered

“We now expect the RBI to hike the repo rate by 50 bps to 5.9% (from 35 bps previously) and stay vigilant on upside risks to its inflation projections. We also raise our terminal repo rate forecast to 6.50% from 6% previously; we forecast a 35 bps hike in December (from 25 bps previously) and a final 25 bps hike at the February 2023 meeting (from flat previously).” 

TDS

“Despite USD/INR above 80, we don't think the RBI will rely on big rate hikes to defend the INR. Further, the RBI needs to consider the growth trajectory from a rapid increase in rates. Q2 GDP surprised to the downside at 13.5% YoY, short of RBI's forecast at 16.2% YoY which may concern the RBI. This gives the RBI a reason to step down to 35 bps.”

SocGen

“While we expect the RBI to raise the policy rate by another 50 bps to 5.9%, in line with its desire to frontload rate hikes, the central bank may not be too far from ending its hiking cycle, with the focus then shifting to growth given the stubbornly high unemployment rate.”