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Brokerages expect the Reserve Bank of India (RBI) to raise policy rates by another 50 basis points by March-end, after it had hiked the rates on Wednesday.
Nomura analysts expect RBI to push rates up by another 25 basis points at the next policy meet in August and then maintain status-quo. “Expect recent tightening of financial conditions and higher oil prices to slow growth in H2 FY19,” Nomura says.
Citi India economists are betting on further increase in rates in October, while Morgan Stanley expects the rise in rates to be “front-loaded” with hikes in both August and October. “Total quantum of rate hikes will remain at 75bps for this cycle,” Morgan Stanley says.
Analysts at JP Morgan opine that the recent tightening of global financial conditions has made “the timing between today and the August review a toss-up”.
UBS Securities India analysts believe MPC retaining neutral policy stance despite the rate hike suggests that “this is a shallow rate hike cycle and will likely be data dependent”. Emkay Global Financial Services believes RBI will recalibrate its stance and increase the repo rate by over 50bps in FY19.
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