Economists at Nomura Holdings Inc., Barclays Plc and Deutsche Bank AG predict that the RBI will raise rates by 50 basis points on June 6-8. Citigroup Inc. says the minutes reveal the central bank’s “clear hackish promise” to bring inflation back to its 2-6% target band.
“The minutes confirm our view that the policy is behind the curve and needs to be significantly caught up by increasing the front load rate,” Nomura economists Sonal Verma and Arodeep Nandi wrote in a note on Wednesday, raising their forecast for June from 50 basis points to 35 basis points.
Inflationary pressures, including war-induced supply-chain disruptions, have pushed up prices of commodities, including food, fuel and fertilizers. Retail inflation hit an eight-year high in April, with wholesale prices hitting the fastest pace in three decades in the same month.
Kaushik Das, an economist at Deutsche Bank, said there was a “high risk” that inflation would remain above 7% for the rest of the 2022-23 fiscal and that it could push the RBI up 50 basis points in June and 25 basis points in August. .
RBI minutes released on Wednesday show that monetary policymakers have called for the reversal of epidemic-era housing during the meeting. External member Jayant Rama Verma called for a 100 basis point rate hike “to be implemented soon”, where Ashima Goel wanted the rate hike to be loaded forward.
“We see a clear focus on reaching the pre-epidemic financial situation, which we expect to happen in the August MPC,” said Rahul Bajoria, an economist at Barclays in Mumbai.
The exchange is set to raise prices by 60 basis points in June, with the next two meetings set to add another 50 basis points and 60 basis points, according to Naveen Singh’s trading chief.
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