To safeguard medium-term economic stability in the face of the unsettling inflation situation, the Reserve Bank of India (RBI) will choose a greater, 0.50 percent, boost in key rates at its next monetary policy review in June, a British brokerage said on Thursday. According to the economists at Barclays, the central bank will probably update its inflation forecast to 6.2-6.5 percent, which is significantly higher than the upper limit of its tolerance range of 2 to 6 percent.
Regarding growth, it was said that the RBI would review its FY23 GDP expansion to 7% from the previous 7.2%. According to Rahul Bajoria, the RBI's senior economist, "we expect the RBI to deliver another big interest rate hike in June, as above-target inflation could endanger medium-term economic stability." The rate increase could be 0.50 percent.
The RBI unexpectedly increased its benchmark rate by 0.40 percent on May 4, and Governor Shaktikanta Das has already stated that another increase at the June review is "a no-brainer." According to Bajoria, RBI may be able to navigate the present inflation rise thanks to his assessment of higher threshold inflation and lower trend inflation.
The "primary difficulty," he stated "for the RBI is to strike a balance between inflation and growth threats. We believe the RBI will stick to its plan and raise the repo rate by 0.50 percentage points in June, bringing it to 4.90 percentage points, given the central bank's desire to signal that inflation management is still crucial to achieving its policy goals "He said, adding that the decision would be made unanimously by the six members of the rate-setting panel.
The firm added that in the basic case, it anticipates a 0.50 percent increase in the cash reserve ratio once more to bring the level to 5%, but added that further tightening of liquidity cannot be ruled out. The CRR (Cash Reserve Ratio), or the number of time deposits banks must keep with the RBI, was increased by 0.50 percent at the May 4 review to drain an additional Rs 87,000 crore from the system.