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Will RBI catch up with rest of the world on Friday in terms of rate hike?

Byadmin

Aug 5, 2022


On August 5, the (RBI) is expected to announce another rate hike as it plays catch up with other central banks to contain inflation and protect against further rupee depreciation. While the raised rates by 75 basis points (bps) at its meeting in July, the (ECB) instituted its first rate hike in 11 years, as it increased the deposit rate by 50 bps.

On August 4, the is expected to raise rates by 50 bps to 1.75 per cent. A Business Standard poll of 10 economists expects the to raise rates by 35-50 bps.

The current hike is expected to drive the repo rate either equal to or above the pre-pandemic level. Even if the raises rates by 50 bps, the quantum of hikes would still be lower compared to other major economies. The has raised rates by 1.65 per cent since March 2020, whereas the US Fed has instituted a 2.25 per cent rate increase during this period. With a 50-bp hike, India’s rates would have risen by 1.4 per cent.