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RBI may slow rate hike pace on growth concerns
September 01, 2022
The Reserve Bank of India (RBI) may ease its pace of rate hikes from this month and shift to similar moves after softer-than-expected growth in April-June, Deutsche Bank said.
Asia’s third-largest economy grew 13.5% in the April-to-June quarter, which was lower than RBI’s projection of 16.2% and 15.2% forecast by economists in a Reuters poll.
“Given that April-June’s GDP growth has disappointed significantly compared to RBI’s forecast, we will not be surprised, if RBI decides to slow down its pace of rate hikes to 25 bps clips from September onwards,” Kaushik Das, chief economist at Deutsche Bank said.
Das added that the central bank may consider 35 bps rate hike, should the U.S. Federal Reserve deliver a 75 bps rate hike on Sep. 21.
The RBI had raised repo rate by 50 basis points in August to 5.40%, after a 50 bps rate hike in June and 40 bps in May. The next policy decision is due on Sep. 30.
The bank expects sequential momentum of growth to slow down in coming months, as pent-up demand wanes and the cumulative impact of RBI’s rate hikes starts filtering into the real economy.
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