RBI Preview: Forecasts from five major banks, hiking 25 bps, will be the final?

India’s Monetary Policy Committee (MPC) is scheduled to announce its Interest Rate Decision on Thursday, April 6 at 04:30 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of five major banks for the upcoming central bank's meeting.  

Reserve Bank of India is expected to hike rates by 25 basis points to 6.75%. At the last policy meeting on February 8, the central bank hiked rates by 25 bps to 6.50%.

ING

“We expect the RBI to hike rates a further 25 bps at its April meeting, taking the repo rate to 6.75% as inflation remains above the top of the upper target band (6%) and core rates of inflation also remain elevated. We do, however, think that this might be the last hike in this cycle as we expect inflation to drop sharply in March.”

ANZ

“We expect the MPC to deliver a 25 bps rate hike albeit with a divided vote. We also do not expect a change in the MPC’s overall hawkish stance as upside inflation risks remain on the radar, especially with the rising probability of an El Niño event this year. As such, the RBI will leave the door open for further rate hikes, if needed. However, banking liquidity has fallen significantly, and sans central bank intervention, it will likely turn negative in the coming months. That said, we expect this to be the final increase in the current hiking cycle for now. From Q2, inflation is expected to thaw below the 6% tolerance limit, which could allow the RBI to pause and switch to wait-and-watch mode to assess the impact of past hikes. Some early signs of them working, like the peaking of bank credit growth, are already visible.”

Standard Chartered

“We expect a 25 bps repo rate hike to 6.75%. Given the recent stabilisation of risk sentiment with regard to global financial sector stability issues and domestic inflation persisting above 6% (upper end of the 4+/-2% target range), we expect the MPC to deliver the final rate hike of this cycle. That said, we expect commentary to be more balanced compared to February, as global central banks attempt to take financial system risks into cognisance. More importantly, the MPC is likely to maintain its ‘withdrawal of accommodation’ stance, to allow for policy flexibility amid economic uncertainty. Overall, we see the MPC on a prolonged pause after April, given that inflation is likely to sustainably moderate below 6% from March 2023; the MPC may maintain its FY24 (year beginning April) CPI inflation forecast at 5.3%. We do not see any rate cuts in FY24.”

TDS

“We expect the RBI to raise its repo rate by 25 bps to 6.75% in what we think will be its last hike of the cycle (275 bps of hikes). Inflation remains above the RBI's 2-6% target range at 6.44% YoY and we think the RBI will try to help nudge inflation lower by raising rates. We also expect the Bank to shift its stance to ‘neutral’ from a ‘withdrawal of accommodation stance’.”

SocGen

“The RBI’s immediate focus would be to ensure that the strength and vitality of the banking system have not been compromised as it tries to cope with the impact of monetary policy tightening. Hence, after having delivered the fastest repo hike pace in more than two decades, we believe it would make sense for the RBI to pause and take stock of the situation. This would allow the lagged effect of transmission of the monetary policy action to play through before deciding on the next rate action. Hence, we expect the central bank to keep the policy rate unchanged at 6.5%.”