RBI to go fast with rate hikes in 2022, slow the next: Poll

A new Reuters poll of economists pointed out that the Reserve Bank of India will concentrate interest rate hikes over the coming months in a relatively short tightening cycle. 

New Delhi: The Reserve Bank of India will concentrate interest rate hikes over the coming months in a relatively short tightening cycle, according to a Reuters poll of economists who expect the repo rate to reach its terminal level early next year. Following a surprise rate rise on May 4, several members of the Monetary Policy Committee called for more in upcoming meetings this year to control sticky price pressures, which hit an eight-year high last month. That sentiment was echoed in a May 26-June 1 Reuters poll that predicted the central bank would raise its key policy rate by at least 100 basis points over the next four MPC meetings.

The RBI was expected to follow up its unscheduled 40 basis point repo rate hike in May to 4.40% with another move at the policy meeting on June 8 - a "no-brainer" according to governor Shaktikanta Das.

By how much was unclear as forecasts were split six ways, ranging between 25 and 75 basis points. That is only marginally changed from the seven-way split in a similar poll taken a month ago. [RBI/INT]

The repo rate was expected to reach its pre-pandemic level of 5.15% or higher next quarter, according to 41 of 47 respondents. It will end the year at 5.50%, the median showed, 110 basis points above where it is now and 19 of 47 saw it even higher.

"Most of the hikes will come this year and we expect this cycle to end in April next year...the urgency for more hikes will continue to diminish from Q4 (2022) onwards," said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics.