Tag : Pandemic

Bengaluru: The Reserve Bank of India will follow its surprise May rate rise with another hike at its meeting next month, according to a majority of analysts polled by Reuters who were exceptionally split on the size of the move. India's retail inflation accelerated to an eight-year high in April, remaining above the central bank's tolerance limit for a fourth month in a row, and is likely to stay elevated. The sudden change in views on surging inflation and how to tame it means the RBI will likely take the repo rate, currently at 4.40%, back to at least its pre-pandemic level next quarter and not in 2023 as previously thought. In the latest Reuters poll, over a quarter of economists, 14 of 53, expected the RBI to hike by 35 basis points to 4.75% next month, while 20 expected a larger move ranging from 40-75 basis points, including ten who forecast a 50 basis point hike. Twelve respondents forecast a modest rate rise (10 to 25 basis points) while seven saw no move at the June 6-8 meeting. At the meeting, the RBI is likely to also raise its inflation projection for the current fiscal year and will consider more interest rates, a source aware of the developments told Reuters. However, such an exceptional splintering of views on how the RBI will follow up on its unscheduled 40 basis point move on May 4 shows the challenge facing forecasters who were completely taken off guard and not given clear guidance on what comes next. "We need to really see the second action...in June to really get a grip of exactly what is the scale of policy normalisation that we can expect and the pace as well," said Upasna Bhardwaj, senior economist at Kotak Mahindra Bank, who is predicting a 35 basis point rise to 4.75%, the median forecast for June. But she ...