According to analysts, reserve banks may have reached the end of their tolerance for high inflation and are likely to raise interest rates in the first half of 2022. Central banks will also begin rolling back mitigation policies that have led to easy liquidity conditions, they said.
Analysts’ view was even when inflation dropped to 5.6% in July after breaking the RBI’s tolerance of 6% for two months. The central bank remains accommodative in maintaining its policy status quo and supporting the resurgence of GDP growth.
Treasury Minister Nirmala Sitharaman said Thursday that the current situation does not justify the withdrawal of mitigation measures. Rating agency Krisil said, “The RBI is tolerant of inflation and remains adaptable to support growth given the severe impact on the economy, but inflation continues to rise. So it looks like we’re at the end of the tether. “
“As this pressure (on inflation) continues and system-critical central banks, especially the (US) Fed, begin to normalize, the RBI will begin rolling back accommodations. The RBI will be clearer by the end of this year. We look forward to issuing a statement. We will raise interest rates by 0.25%. “
Acuite, a competitor, said it hopes that vaccination comfort, fiscal stance clarity, and global interest rate setting will begin to phase out policy normalization, the first to achieve the same goal. As a small step, we called for an increase in the volume of variable reverse repo auctions.
Next, the central bank said it could consider raising the reverse repo rate by 0.40% to narrow the gap between the repo rate and the reverse repo rate to 0.25% by February 2022, adding that the repo remained unchanged at 4%. .. In parallel, the promotion of vaccination is expected to lead to herd immunity, after which the RBI said it would follow up in April 2022 with a 0.25 percent rate hike.
Analysts at Japanese brokerage firm Nomura said last week that reviews showed signs of a turning RBI policy towards normalization, with one member of the Monetary Policy Committee saying a “easy stance” and headline inflation in 2010. 5.7 percent pointed out that they were against raising the target.
“The August policy meeting had already shown the first signs of a policy pivot due to coordinated liquidity normalization, followed by the phasing out of durable liquidity injectors, a 0.40% reversal. Repo rate hike (December quarter), the cent of the 2022 repo / reverse repo rate rise. “
Also read: Bank credit rises 6.11% in the two weeks ending July 30: RBI data
According to experts, the RBI will raise rates from early 2022 and take more steps to normalize its policies.
Source link According to experts, the RBI will raise rates from early 2022 and take more steps to normalize its policies.