How high will repo rate go by December? Here’s what experts say

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The Reserve Bank of India (RBI) hiked the repo rate and standing deposit facility rate by 50 basis points (1%=100 basis points) today. However, as per the experts, the current rate hike is not at its peak yet. The policy rate hikes by the central bank will continue in the coming months of this calendar year as well.

Here is what experts say about a hike in repo rate by the RBI by December 2022.

Upasna Bhardwaj, Chief Economist, : The MPC decisions have been in line with our expectations. Given the increasing external sector imbalances and global uncertainties the need for frontloaded action was imperative. We continue to see 5.75% repo rate by Dec 2022.

Abheek Barua, Chief Economist and Executive Vice President, : Unlike previous policies, the central bank also focussed on the resilience of external balances implicitly communicating its preference for not just a less volatile rupee but also perhaps some resistance towards very sharp depreciated levels of the rupee. We expect the RBI to continue with its rate hikes in the upcoming policies taking rates up to 5.75% by the end of the year.

Garima Kapoor, Economist, Elara Capital: After today’s policy we expect hike of another 25 bps in policy rate and expect MPC to become data dependent while it assesses the impact of the recent hikes on inflation.

Churchil Bhatt, Executive Vice President, Debt Investments, at Life Insurance Company: Going forward, the MPC assured markets of its ability to deliver a soft landing for the economy, while keeping inflationary pressures at bay. Given the global recessionary backdrop and its accompanying disinflationary impact, we believe policy rates in India will peak tad below 6% in this calendar year. In light of the same, further rate actions will be more calibrated and data dependent.

Amar Ambani, Head – Institutional Equities Head, YES Securities: The central bank has largely reversed the pandemic-driven monetary stimulus, with the repo rate now at 5.4%. On the future interest rate trajectory, we see that the central bank has frontloaded rate hikes (140 bps since May) over the past 3 months in their endeavour to contain inflation, while excess liquidity in the banking system has moderated to a large extent. Having said that, we see RBI delivering yet another rate hike, probably a mild one (25bps) in October to ensure that price pressure remains under control before it peaks during Q3 FY23. We see the repo rate peaking around 5.7-6.0%.

Vikas Garg, Head of Fixed Income, Invesco Mutual Fund: Continuation with “withdrawal of accommodation” signals more rate hikes to come as healthy economy provides space. Overall, a more hawkish policy than the recent market expectations and reiterates the need to anchor inflation expectations.

Sameer Kaul – MD & CEO, TrustPlutus Wealth: As expected RBI has hiked by fifty bps keeping them in line with what other central banks have done. Till inflation is brought under control, we believe the bias remains in favour of higher rates.

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