RBI to fire the rate rage machine again

The Central Banks around the world have been raising interest rates since the middle of 2022 after the continuous hostilities between Russia-Ukraine led to initial higher inflation across the globe.

As the Federal Reserve raised rates by 75 basis points and the central banks of the UK and the EU have also gone for rate hikes to tame inflation, the Reserve Bank of India (RBI) may also take cues from its global counterparts.

The consumer price index (CPI) based on retail inflation, which had started showing signs of moderation in May, has again firmed up to 7 per cent in August. The RBI takes into account retail inflation while framing its bi-monthly monetary policy.

The RBI, which has since May raised the repo rate by 140 basis points (bps), may again go for a 50-bps increase to take it to a three-year high of 5.9 per cent, say experts.

The government has tasked the RBI to ensure the retail inflation remains at 4 per cent, with a margin of 2 per cent on either side.

RBI had effected 50 basis points increase in repo rate each in June and August after raising the short-term lending rate by 40 basis points in an off-cycle decision in May.

The MPC, headed by RBI Governor Shaktikanta Das, is scheduled to meet during September 28-30.