RBI likely to Raise Interest Rate by 25-50 bps

According to experts, the Reserve Bank of India (RBI) is expected to raise benchmark lending rates by 25-50 basis points on Wednesday as inflation is above comfortable levels. Last month, the RBI raised its repo rate or short-term borrowing rates by 40 basis points in an off-cycle monetary policy review to stop spiral inflation.

The decision by the Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das, which began deliberation on Monday, is expected to be announced on Wednesday.

Das has already indicated that there may be another hike in the repo rate though he refrained from quantifying it. The Consumer Price Index (CPI) based inflation, which RBI factors in while arriving at its monetary policy, is on the rise since October 2021.

Retail inflation has remained above RBI's top tolerance stage of 6% since January. It had soared to 8-12 months excessive of 7.9% in April, exceeding the RBI's tolerance band for inflation of 2% to 6% for the fourth month in a row. Inflation is predicted to live excessively withinside the close to future.