RBI may hike policy interest rates, inflation forecast tomorrow: Top points

The Reserve Bank of India (RBI) is expected to increase the benchmark lending rate by 25-50 basis points on Wednesday as inflation continues to remain above its comfort level, news agency PTI.Last month, the RBI raised the repo rate or short term lending rate by 40 basis points in an off-cycle monetary policy review to check spiralling inflation.Here are top points:> The decision of the Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, is scheduled to be announced at 10 am on Wednesday.> Considering the recent uptick in inflationary pressure, the RBI is likely to revise the inflation forecast for the current financial year to above 6 per cent.> A report by HDFC Bank Treasury Research Desk said the RBI is likely to raise the policy rate by 25 bps while continuing to keep its stance and the CRR rate unchanged. It expects RBI to change the inflation forecast by 70-80 bps from 5.7 per cent earlier, citing the change in global and domestic price pressures.> Indranil Pan, chief economist at Yes Bank, said the inflation surprise has brought to the fore the need for the RBI to tighten the monetary policy.> The government has tasked RBI to ensure India’s Consumer Price Index (CPI)-based inflation remains at 4 per cent with a margin of two per cent on either side.> Inflation has been above the RBI’s 2-6 per cent target band since the beginning of this year.> CPI-based inflation surged to an eight-year high of 7.79 per cent in April. It has been above 6 per cent since January 2022.> Last month, MPC raised the key policy rate (repo) by 40 basis points to 4.4 per cent to tame the rising inflation. It was the first-rate hike after August 2018.> With an aim to cushion the impact of lockdown, the RBI had slashed the repo rate by 75 basis points to 4.40 per cent in March 27, 2020, from 5.15 per cent.> On May 22, 2020, RBI again cut the repo rate by 40 basis points and brought it down to 4 per cent. Thereafter, it maintained status-quo in the benchmark interest rate for almost two years before increasing it on May 4, 2022.(With inputs from PTI, ANI)

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