Expect RBI to deliver final rate hike of 25 bps next week: Kotak Mahindra Bank

“The recent global developments will be weighing heavily during the policy decision-making by the MPC. With domestic inflation also remaining at elevated levels, we expect a 25 bps hike in the repo rate followed by a prolonged pause,” said Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank.

RBI MPC’s first meeting of the new financial year 2023-24 would begin from April 3 and the decision would be announced on April 6.

Citing sticky core inflation, RBI Governor Shaktikanta Das had hiked the benchmark policy rate by 25 basis points to 6.5% in the February meeting. Das had remained non-committal on future rate hike trajectory while the minutes of the February MPC meeting reflected widening divergence among MPC members on the course of action.

Earlier this month, the European Central Bank (ECB) and the US Federal Reserve delivered 50 bps and 25bps hikes, respectively in March.

Incremental rate hikes from these two key central banks will depend on how incoming macro data and financial markets conditions evolve over the next few weeks and months, said Lakshmi Iyer, CEO-Investment & Strategy, Kotak Investment Advisors.

In India, CPI remains above the 6% threshold, including core inflation which remains sticky.”Though CPI is likely to trend lower in the coming months, the probability of a 25 bps rate hike in the upcoming MPC seems high. To hike or not to hike could be the most discussed agenda as the clamour for a pause seems to be only growing,” Iyer said.

Emkay Global said the world order has again evolved dramatically between the last MPC policy and minutes, with higher global (and Indian) inflation prints and Fed terminal rate repricing posing risk to EM reaction functions.

“We are closely watching consistent global policy repricing, the pace of global inflation evolution, and the case for impending recession – all of which will shape DM central bank policies, which could have implications for India,” he said.

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