RBI likely to hike policy rates by 50-75 bps in remaining fiscal: Economists

Economists opine that a combination of normal monsoon and policy tightening by the Reserve Bank of India (RBI) will aid in cooling down inflation by the end of 2022. S&P Global Ratings economist Vishrut Rana pointed out that although there are some additional policy options for addressing broader price pressures such as reduced excise duties, lower value-added taxes or direct subsidies on agricultural produce, emphasis will be on monetary policy to control rising inflation. Rana is expecting 75 basis points (bps) rate increase this year. India Ratings & Research (Ind-Ra) principal economist Sunil Sinha believes that import duty cut and subsidy cut may help rein in inflation. However, he added that these have their own limits and cannot fully offset the impact of imported inflation which besides high prices also seeps into the economy via rupee depreciation. Ind-Ra expects another 50-75 bps hike in the reminder of 2022-23. Moody’s Analytics economist Shahana Mukherjee believes that inflation is more of a result of supply chain disruptions, both globally and domestically. Moody’s expects the benchmark repo rate to be increased by another 60 to 80 basis points in 2022.

References
1. https://www.financialexpress.com/economy/normal-monsoon-interest-rate-cut-key-to-bringing-down-inflation-by-year-end-say-economists/2565713/
2. https://www.business-standard.com/article/economy-policy/normal-monsoon-rate-cut-key-to-bring-down-inflation-by-yr-end-economists-122061900363_1.html
3. https://economictimes.indiatimes.com/news/economy/indicators/normal-monsoon-interest-rate-cut-key-to-bringing-down-inflation-by-year-end-say-economists/articleshow/92315439.cms