The Reserve Bank of India will concentrate interest rate hikes over the coming months in a relatively short tightening cycle, according to a Reuters poll of economists who expect the repo rate to reach its terminal level early next year.
Following a surprise rate rise on May 4, several members of the Monetary Policy Committee called for more in upcoming meetings this year to control sticky price pressures, which hit an eight-year high last month.
The repo rate was expected to reach its pre-pandemic level of 5.15% or higher next quarter, according to 41 of 47 respondents. It will end the year at 5.50%, the median showed, 110 basis points above where it is now and 19 of 47 saw it even higher. Indeed, the predicted tightening path for next year was more subdued with only 40 basis points pencilled in the first half before a pause, poll medians showed.
While inflation looks set to remain elevated, reflecting high global energy and food costs, economic growth prospects have started to look bleak. GDP growth slowed to its weakest in a year last quarter on a year ago, the third consecutive slowdown.This may lead the RBI - which had long prioritised growth over inflation, holding rates steady until abruptly raising them at an unscheduled meeting - to consider ending this tightening cycle less than a year after starting it.
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