Deutsche Bank said on Monday that fears of a sharp increase in monetary rates by the Reserve Bank of India (RBI) are now weakening. A higher rate hike is not expected by the RBI in September and the central bank may opt for a 0.25 percent hike in the repo rate.
RBI has increased the repo rate three times in a row since May this year. After May, it increased by 1.40 percent. The high level of inflation has forced the RBI to do so. At present, the inflation figures in the country are above the tolerance level set by the government.
Will RBI reduce rates?
In a report, the Germany-based bank said that based on the recently issued MoM of the last meeting of the Monetary Policy Committee (RBI MPC), it can be said that the RBI will now slow down the rate hike. The report pointed to the statement of RBI Governor Shaktikanta Das, where he said that any rate hike action would be taken very carefully and with due diligence and would be implemented to yield quick results.
RBI executive director Rajiv Ranjan, who is also a member of the MPC, has suggested a similar policy, the report said. According to the report, Ranjan has said in his statement that further policy actions will increase the credibility of monetary policy and there will be less need for aggressive rate hikes in the future. RBI Deputy Governor Michael Patra has also given similar indications. Let us tell you that RBI has already taken measures like increasing the repo rate to prevent inflation. In FY2011, the repo rate was increased by 2 percent to 6.75 percent. After this, in the financial year 2012, the repo rate was increased to 1.75 percent and it went up to 8.50 percent.
In another report, domestic brokerage agency Kotak Securities has said that the MPC MoM makes it clear that further rate hikes are required to ensure the credibility of monetary policy.
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