Hike rates

RBI may hike next year’s rates on inflation, Goldman Sachs predicts

Mumbai: India’s central bank may start tightening monetary policy from next fiscal year as consumer prices rise, according to Goldman Sachs Group Inc.

“Inflation is going to determine what the RBI does over the next year,” said Santanu Sengupta, senior Indian economist at Goldman, in an interview with Juliette Saly and Rishaad Salamat on Bloomberg TV. “Input cost increases for manufacturers will be passed on to consumers over a period of time as the economy reopens and pricing power returns.”

Indian companies have seen pressure on their margins as supply-side constraints and global commodity prices drive up input costs. This drove up overall inflation as some of these companies began raising prices for customers.

“We first expect the RBI to continue the liquidity tightening underway at the moment and then to increase the reverse repo by 40 basis points,” Sengupta said, forecasting 75 basis points of rate hikes. repo in 2022. He expects inflation to be around 5.8% next time. the year, higher than the 5.2% estimated for the current year.

The central bank is expected to keep its policy rates broadly unchanged at its meeting next week. Data due later on Tuesday will likely show gross domestic product rose 8.3% in the three months to September, remaining on track to generate the fastest growth among major economies this year. But there are potential risks from the new variant of the omicron coronavirus.

“As for the new variant, it’s too early to incorporate anything into our predictions,” Sengupta said. “We’re going to be watching this very closely to see where it goes.” – Bloomberg

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