Hike rates

India’s RBI could hike rates by 50bps as inflation picks up – analysts

A man walks behind the Reserve Bank of India (RBI) logo inside its head office in Mumbai, India, April 8, 2022. REUTERS/Francis Mascarenhas/File Photo

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MUMBAI, Sept 13 (Reuters) – The Reserve Bank of India could raise interest rates by another 50 basis points this month after data showed inflation again exceeded the bank’s tolerance limit central in August, analysts said.

India’s retail price inflation rate rose to 7.0% in August from 6.71% in the previous month, data showed on Monday. The August reading was slightly above the 6.9% expected by economists polled by Reuters. The rise in food inflation contributed to the increase in the overall rate.

“Politically, another month of above-target inflation paves the way for further monetary tightening at the next MPC (Monetary Policy Committee) meeting on September 30,” Rahul Bajoria said. , chief economist for India at Barclays Bank.

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The relatively resilient growth outlook, coupled with robust credit growth and persistent underlying inflation, will keep the RBI’s focus firmly on inflation management, Bajoria said in a note.

Core CPI rose 6.17% in August, according to Barclays calculations.

“It is clear that inflation remains uncomfortably high and (the August data) will do little to allay the concerns of several MPC members, who continue to strike a relatively hawkish tone,” Shilan Shah said. , senior Indian economist at Capital Economics, in a note. .

Shah expects RBI to move to 25 basis point hikes in the two meetings following the September meeting, taking the repo rate to 6.40% in the first quarter of next year.

Uneven monsoon rains led to higher food prices in the first two weeks of September, IDFC First Bank pointed out. As a result, September’s preliminary CPI inflation estimate is tracking an “uncomfortable” level of 7.3%, he said. The bank expects inflation to average 6.7% for this fiscal year.

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Reporting by Nimesh Vora

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