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Experts say that the RBI has increased the interest rate for the fourth time in a row to control inflation.

Experts say the RBI, which has hiked the repo rate by 140 basis points since May, may again take it by 50-bps to a three-year high of 5.9%.

Experts say the RBI, which has hiked the repo rate by 140 basis points since May, may again take it by 50-bps to a three-year high of 5.9%.

The Reserve Bank of India (RBI) may take cues from its global counterparts, including the US Federal Reserve, to raise interest rates for the fourth time in a row on September 30 to check stubborn inflation.

Experts say the RBI, which has hiked the short-term lending rate (repo) by 140 basis points (bps) since May, is again taking it up by 50-bps to a three-year high of 5.9%. could.

The central bank had increased the repo rate by 40 bps in May and 50 bps in June and August. The current rate is 5.4%.

Read also | Economic activity is still below pre-pandemic levels; RBI to cut rates by next year: ADB

The consumer price index (CPI)-based retail inflation, which started showing signs of moderation from May, has again strengthened to 7% in August. RBI takes into account retail inflation while formulating its bi-monthly monetary policy.

The Monetary Policy Committee (MPC) headed by RBI Governor is scheduled to begin its three-day deliberations on September 28. The decision of the rating panel will be announced on September 30.

The US Fed hiked for the third time in a row after raising rates by 75 bps to take the target range to 3 – 3.25%. Central banks in the UK and the European Union have also raised rates to contain inflation.

Bank of Baroda Chief Economist Madan Sabnavis said inflation in India remains at around 7% and is unlikely to come down any time soon.

“It means that the rates have been hiked. Quantity is what the market will be interested in. While a rise of 25-35 bps may have indicated that the RBI is confident that the worst of inflation is over, the recent developments in the forex market may indicate a higher volume of 50 bps. To stay on track with other markets so that the interest of investors remains,” he said.

The government has tasked the RBI to ensure that retail inflation remains at 4%, with a margin of 2%, on either side.

Dhruv Aggarwal, Group CEO, Housing.com, said amidst resilient economic expansion and strong credit growth, containing inflation will continue to be the RBI’s top concern.

“Any hike in rates will result in banks increasing the home loan interest rates as well. But, we are of the view that the impact will not be significant as demand for the property remains strong. The demand is going to pick up further during this festive season,” he said.

Global commodity prices remain volatile after falling from historic highs in June.

SBI said in a special report that a 50 basis points hike in the repo rate “looks imminent”.

“We expect the peak repo rate to be 6.25% in the cycle. A final increase of 35 bps is expected in the December policy,” it said. ICRA Chief Economist Aditi Nair also expects another ‘new normal’ of 50 bps growth from the MPC in September 2022.

He added that with inflation expected to soften in October 2022, the December policy decision is likely to be highly data-dependent.

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