With split vote, RBI may hike repo rate by 25 bps: Experts

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New Delhi, February 7

The RBI will announce the bimonthly monetary policy tomorrow after three days of deliberations of the Monetary Policy Committee (MPC), which began on Monday.

Monetary policy today

In India, core inflation has been elevated for longer; however, it eased sequentially in the second half of 2022. An already elevated 6.25% policy rate limits the need for further increases. Standard & Poor’s report

There is a considerable degree of suspense about the RBI’s decision with most experts having the view that the rate hike might be of the order of 25 basis points to 6.50%. There is already resistance among some members of the MPC to another aggressive rate hike. At the previous MPC meeting in December, one of the members, Jayanth Varma, had voted against the recommendation to hike the repo rate by 35 basis points to 6.25%. Some feel that this time, the seven-member MPC may have to decide on a high rate by a narrow majority.

Though inflation has come down, the RBI feels that core inflation continues to persist but it needs to be brought down by raising interest rates in a manner that does not hurt the economy’s growth prospects.

S&P Global Ratings said core inflation in India has been declining sequentially, and an elevated 6.25% policy rate limits the need for further rate hikes. “In India, core inflation has been elevated for longer; however, it eased sequentially in the second half of 2022. An already elevated 6.25% policy rate limits the need for further increases,” said the S&P report.