RBI MPC Meet 2022: Rate Setting Panel Expected To Opt For 25-35 Bps Hike, Say Experts

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will be meeting for the last time today in this calendar year. Ahead of the briefing by RBI Governor Shaktikanta Das at 10 am, experts and analysts have predicted outcomes favourable in interest rate hike, though the hike is expected to be moderate. 

So far, in FY23, the Central Bank has opted for varied hikes in interest rates, ranging from 40 bps in May to 50 bps in June, August and September. While an off-schedule RBI meeting was organised recently, it was majorly to discuss inflationary pressures and why rising prices could not be controlled till the pre-determined levels. 

This time, in the RBI December MPC Meeting, analysts expect slow economic growth to be the key driver of MPC’s decisions on interest rates. On this, Madan Sabnavis, Chief Economist, Bank of Baroda says, “We do believe that the MPC will continue with rate hikes this time though the magnitude will be lower - probably 25-35 bps. More specifically we do believe that the terminal repo rate for the financial year will be 6.5%, which means there will be one more rate hike in February. It is unlikely to change the stance and the withdrawal of liquidity will continue.”

Even an economists-driven poll by Reuters predicted that the RBI will raise the interest rates by a 35 bps to about 6.25 per cent levels. However, the interest rate hike is not expected to pause here. Some experts believe that RBI’s MPC may opt for another smaller revision in rates later, depending on inflation and several other factors. 

Virat Diwanji, Group President & Head, Consumer Bank, Kotak Mahindra Bank Ltd., says, “With the rupee holding itself steady and crude prices hovering in the comfortable zone, the MPC might go in for a mild to a moderate tweaking of the interest rates. A marginal upward revision of 35 basis points is expected this December, followed by another 25 bps hike.”

However, on the backdrop of all this is World Bank’s growth forecast for India. As per latest updates, the bank has revised the 2022-23 GDP forecast upwards to 6.9 per cent from the previous 6.5 per cent made in October. As India navigates a predicted global economic downturn, all eyes are now set on the outcome of RBI’s bi-monthly policy review.