RBI May Extend Rate Hike Pause Through Year-End, Likely Done Hiking, Says Reuters

The Reserve Bank of India (RBI) may reportedly keep the interest rates unchanged at least until the end of this fiscal year. As per a Reuters poll, the central bank of the country is most likely done hiking these interest rates and may pause them for some time.

As per the Reuters report, the RBI may extend this pause on rate hike as it evaluates the delayed impact of previous hikes on economic growth and high inflation. It must be noted that the outcome of the Reuters poll is somewhat opposite to what RBI Governor Shaktikanta Das said in the Monetary Policy Committee (MPC) address, where he clarified that the current pause is just for this time. 

For those not familiar with the finer nuances of the issue, last week, the RBI surprised everyone by leaving the repo rate unchanged at 6.50 per cent. After raising the same for six consecutive times and speculations of another 25 bps hike, the pause announced by the RBI Governor came as a surprise for everyone. 

While the central bank’s governor emphasised that the pause is only for this time and that the MPC may take a call on successive rate hikes depending on the situation, the majority of economists, as per the poll, expect RBI to remain on hold. The finding also comes as a surprise since inflation is still out of RBI’s tolerance levels. 

As per another finding of the Reuters poll, only about one-sixth predicted a hike of 25 bps to 6.75 per cent by the year end. Out of 31 respondents who answered additional questions of the poll, more than 80 per cent said that high inflation could be a reason for the RBI to resume interest rate hike.