RBI set for fourth straight rate hike to quell inflation, say experts

The RBI, which has since May raised the repo rate by 140 basis points, may again go for a 50-bps increase to take it to a three-year high of 5.9%, say experts

The Reserve Bank of India (RBI) may take cues from its global counterparts, including the U.S. Federal Reserve, to raise interest rate for the fourth time in a row on September 30 to tame stubborn inflation.

The RBI, which has since May raised the short-term lending rate (repo) by 140 basis points (bps), may again go for a 50-bps increase to take it to a three-year high of 5.9%, say experts.

The Central bank had raised the repo rate by 40 bps in May and 50 bps each in June and August. The present rate is 5.4%.

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The consumer price index (CPI) based retail inflation, which had started showing signs of moderation since May, has again firmed up to 7% in August. The RBI takes into account retail inflation while framing its bi-monthly monetary policy.

The RBI Governor-headed Monetary Policy Committee (MPC) is scheduled to start its three-day deliberations on September 28. The decision of the rate-setting panel would be announced on September 30.

The U.S. Fed delivered third consecutive rate hike after it raised the rates by 75 bps to take the target range to 3 - 3.25%. The Central banks of the U.K. and the EU have also gone for rate hikes to tame inflation.