From The Economic Times · Reuters · · 1m 40s
Markets bet on RBI rate hike as inflation pressure builds
Investors expect RBI to raise rates this week amid rising inflation and global hawkishness.
In brief
Investors expect RBI to raise rates this week amid rising inflation and global hawkishness. Markets price a 25-basis-point RBI rate hike this week as inflation pressures broaden beyond food and fuel. Originally reported by The Economic Times.
Investors bet on RBI rate hike
Investors have loaded up on bets that the Reserve Bank of India will raise rates this week, warning that it risks falling behind the curve as inflation quickens, growth remains resilient and major central banks turn more hawkish.
60% expect 25-basis-point hike
Nearly 60% of economists polled by Reuters, 35 out of 61, expect a 25-basis-point rate hike at its policy meeting on Wednesday.
RBI rate hike impact
If delivered, the hike would be the RBI's first in nearly four years and lift the benchmark repo rate from 5.25% where it has remained for nearly 10 months.
Inflation pressures broaden
Consumer inflation picked up in August to 4.82%, above the RBI's 4% medium-term target for a third consecutive month, with prices across nearly half of the CPI basket rising at or above the target.
Economists expect 100-basis-point cycle
Economists at Nomura and Barclays have penciled in a shallow hike cycle of 25-50 bps while BofA and ANZ anticipate between 75 and 100 bps of rate increases.
RBI's next move
BofA's Bajoria reckons the RBI may not want to commit to a longer hiking cycle in October itself, but could be open to doing so in December.
Market reaction
The rupee remains under pressure, about 1% off record lows hit in May, as higher rates could make Indian bonds more attractive to foreign investors.
The key point
Markets price a 25-basis-point RBI rate hike this week as inflation pressures broaden beyond food and fuel.
