ANIRBI may hike interest rate further in December policy: Experts
New Delhi: With the RBI changing its monetary policy stance from 'neutral' to 'calibrated tightening ', experts on Wednesday said that the central bank would go for another rate hike of up to 50 basis points in its upcoming December policy.
The next bi-monthly monetary policy is due on December 4.
Earlier in the day, the Reserve Bank of India raised its benchmark interest rate by 25 basis points to 5.50 per cent, its first increase in nearly four years, and signalled that further hikes could follow as rising inflation and a weakening currency prompt a policy pivot.
Also Read: A new rate game begins. What’s inside the RBI’s new playbook?
Anticipating the rate hike by the RBI, Bajaj Finance has raised interest rates on its fixed deposits by 15 to 40 basis points across all tenures from 12 to 60 months.
The revised rates take effect from October 7 and apply to both fresh deposits and renewals, Bajaj Finance said in a statement.
The biggest increase is on longer tenures, it said, adding, interest rates on deposits for 31 to 60 months rise by 35 basis points for regular depositors and 40 basis points for senior citizens.
According to HDFC Bank Principal Economist Sakshi Gupta, "We expect cumulative rate hikes by the central bank to the tune of another 50-75 bps over the next few months. The risk of a more aggressive rate hike cycle hinges on whether the current West Asia conflict and rise in oil prices continue to linger on for longer."
The inflation prints are expected to harden moving forward, on account of a combination of factors such as the poor monsoon, rising commodity prices and an unfavourable base effect, setting the stage for another rate hike in December as of now, ICRA Chief Economist Aditi Nayar said.
The current inflationary trends on the food as well as fuel front have weighed heavily on RBI, prompting it to increase the repo rate.
Going forward, a further rate increase at least in the next two quarters, if not more, and this may help in bringing about an effective check on inflationary expectations and ensuring stability, Resurgent India MD Jyoti Prakash Gadia said.
Echoing a similar view, Yes Bank Chief Economist Indranil Pan said, "All policies remain live; a December hike of 25 bps is a certainty now. The RBI will continue to remain data-dependent and factor in the breadth of inflation pressures in the months ahead to determine the cumulative dose of hikes."
Crisil Principal Economist Dipti Deshpande said retail inflation has firmed in recent months, while upside risks from crude oil, commodities and food prices have become more pronounced.
A calibrated tightening stance allows the central bank the choice to either hike rates or take a pause depending on evolving inflation conditions, she said.
With rising energy prices, broader price pressures and volatility in global markets, the move reinforces the RBI's focus on anchoring inflationary expectations while supporting the resilience of the domestic economy, Tata Capital MD & CEO Rajiv Sabharwal said.
RBI's decision to raise the repo rate by 25 basis points is a measured response to the evolving macroeconomic environment, said Abhimanyu Munjal, MD and CEO of Hero FinCorp.
For NBFCs, higher rates will have an impact on funding costs, making disciplined pricing, a diversified funding mix and prudent underwriting even more important, he said.
Ranen Banerjee, Partner and Leader, Economic Advisory, PwC India, also said the MPC was widely expected to increase the repo rate.
"The increase in repo rate with a change in stance to calibrated tightening will help provide that anchor to inflation expectations. The future actions will now depend on the US Fed action, global bond yield movements, food inflation trajectory and crude oil prices," he said.
According to Shrikant Goyal, Managing Director, Getfive Funds, the timing of the rate hike is notable for MSMEs, as the festive season is when they ramp up inventory, production and hiring, and rely heavily on working capital and short-term credit.
Amit Prakash Singh, Co-founder & Chief Business Office, Urban Money, said the hike has to be viewed in the larger geopolitical context.
"The RBI's decision to hike the repo rate to 5.50 per cent reflects a proactive, stability-first approach designed to anchor long-term economic health amidst evolving global headwinds.
The RBI's decision to hike the repo rate to 5.5 per cent reflects a proactive, stability-first approach designed to anchor long-term economic health amidst evolving global headwinds, MIDASX CEO Aakash Bansal added.
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The next bi-monthly monetary policy is due on December 4.
Earlier in the day, the Reserve Bank of India raised its benchmark interest rate by 25 basis points to 5.50 per cent, its first increase in nearly four years, and signalled that further hikes could follow as rising inflation and a weakening currency prompt a policy pivot.
Also Read: A new rate game begins. What’s inside the RBI’s new playbook?
Anticipating the rate hike by the RBI, Bajaj Finance has raised interest rates on its fixed deposits by 15 to 40 basis points across all tenures from 12 to 60 months.
The revised rates take effect from October 7 and apply to both fresh deposits and renewals, Bajaj Finance said in a statement.
The biggest increase is on longer tenures, it said, adding, interest rates on deposits for 31 to 60 months rise by 35 basis points for regular depositors and 40 basis points for senior citizens.
According to HDFC Bank Principal Economist Sakshi Gupta, "We expect cumulative rate hikes by the central bank to the tune of another 50-75 bps over the next few months. The risk of a more aggressive rate hike cycle hinges on whether the current West Asia conflict and rise in oil prices continue to linger on for longer."
The inflation prints are expected to harden moving forward, on account of a combination of factors such as the poor monsoon, rising commodity prices and an unfavourable base effect, setting the stage for another rate hike in December as of now, ICRA Chief Economist Aditi Nayar said.
The current inflationary trends on the food as well as fuel front have weighed heavily on RBI, prompting it to increase the repo rate.
Going forward, a further rate increase at least in the next two quarters, if not more, and this may help in bringing about an effective check on inflationary expectations and ensuring stability, Resurgent India MD Jyoti Prakash Gadia said.
Echoing a similar view, Yes Bank Chief Economist Indranil Pan said, "All policies remain live; a December hike of 25 bps is a certainty now. The RBI will continue to remain data-dependent and factor in the breadth of inflation pressures in the months ahead to determine the cumulative dose of hikes."
Crisil Principal Economist Dipti Deshpande said retail inflation has firmed in recent months, while upside risks from crude oil, commodities and food prices have become more pronounced.
A calibrated tightening stance allows the central bank the choice to either hike rates or take a pause depending on evolving inflation conditions, she said.
With rising energy prices, broader price pressures and volatility in global markets, the move reinforces the RBI's focus on anchoring inflationary expectations while supporting the resilience of the domestic economy, Tata Capital MD & CEO Rajiv Sabharwal said.
RBI's decision to raise the repo rate by 25 basis points is a measured response to the evolving macroeconomic environment, said Abhimanyu Munjal, MD and CEO of Hero FinCorp.
For NBFCs, higher rates will have an impact on funding costs, making disciplined pricing, a diversified funding mix and prudent underwriting even more important, he said.
Ranen Banerjee, Partner and Leader, Economic Advisory, PwC India, also said the MPC was widely expected to increase the repo rate.
"The increase in repo rate with a change in stance to calibrated tightening will help provide that anchor to inflation expectations. The future actions will now depend on the US Fed action, global bond yield movements, food inflation trajectory and crude oil prices," he said.
According to Shrikant Goyal, Managing Director, Getfive Funds, the timing of the rate hike is notable for MSMEs, as the festive season is when they ramp up inventory, production and hiring, and rely heavily on working capital and short-term credit.
Amit Prakash Singh, Co-founder & Chief Business Office, Urban Money, said the hike has to be viewed in the larger geopolitical context.
"The RBI's decision to hike the repo rate to 5.50 per cent reflects a proactive, stability-first approach designed to anchor long-term economic health amidst evolving global headwinds.
The RBI's decision to hike the repo rate to 5.5 per cent reflects a proactive, stability-first approach designed to anchor long-term economic health amidst evolving global headwinds, MIDASX CEO Aakash Bansal added.
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