InvestorQ : Do you see the RBI aggressively hiking rates in the June policy?
Lavanya Subramanian made post

Do you see the RBI aggressively hiking rates in the June policy?

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Anamika Sodhani answered.
2 months ago
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As the June policy approaches, the big question is, what will the RBI do? In a recent note, Barclays is of the view that RBI would raise repo rates by 50 bps to 4.90% while the CRR (cash reserve ratio) would be hiked by 50 bps to 5%. It would be a continuation of the special monetary policy meeting in May, amplified the 40 bps rate hike with a 50 bps CRR hike. Like on the previous occasion in May, the CRR hike would nearly pre-empt Rs87,000 crore of liquidity from the system. That would still be 25 bps short of pre-COVID rates.

That view point is supported by data flows too. For instance, April 2022 consumer inflation stands at 7.79% while WPI inflation was 15.08%. Recent IIP and core sector numbers have hinted at the economy growing above pre-COVID levels. The message is that the RBI can really after inflation, hammer and tongs. Growth is not an immediate worry for the RBI. That would also ensure very limited monetary divergence with the US policy stance and ensure that capital flows are not negatively impacted.

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