RBI likely to moderate interest hike: Experts

The Reserve Bank of India (RBI) will come out with its next bi-monthly policy review on December 7 at the end of the three-day MPC meeting.

After three back-to-back 50 basis points hike in interest rates, the Reserve Bank may opt for a lower rate increase of 25-35 bps in lending rates at its coming monetary policy review on Wednesday amid retail inflation showing signs of moderation and the need to push growth, according to experts.

The Reserve Bank of India (RBI) will come out with its next bi-monthly policy review on December 7 at the end of the three-day meeting of the Monetary Policy Committee (MPC) beginning Monday.

In addition to the domestic factors, the RBI committee may also take some cues from the US Federal Reserve which hinted at a lower rate hike of 50 basis later in the month. In order to combat inflation, the Federal Reserve had earlier hiked the key interest rates four times by 75 basis points (bps) each.

The Reserve Bank since May has increased the repo or benchmark lending rates by 190 basis points, to calm down inflation which has remained above its comfort level of 6% since January.

Madan Sabnavis, Chief Economist, Bank of Baroda, said the RBI will be presenting the monetary policy against the backdrop of GDP growth slowing down as well as inflation being high above 6%.

"We do believe that the MPC will continue with rate hikes this time though the magnitude will be lower - probably 25-35 bps. More specifically we do believe that the terminal repo rate for the financial year will be 6.5%, which means there will be one more rate hike in February," he said.