Synopsis
State Bank of India has revised its estimate for the upcoming Reserve Bank of India rate hike. The new projection suggests a 0.25 percent increase instead of a previously expected 0.50 percent. This adjustment follows improvements in external conditions and a revival in foreign fund inflows. Analysts note that inflation is projected to remain above 6 percent in November before easing.
Reuters Analysts note that inflation is projected to remain above 6 percent in November before easing Mumbai: State Bank of India’s Economic Research Department on Thursday revised the estimate for RBI’s December rate hike to 0.25 per cent, down from the earlier projection of 0.50 per cent.
In a note, they attributed the revision to improved external conditions, revival in foreign fund inflows and easing pressure on the rupee.
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Interestingly, the note got published hours after headline inflation shooting the 6 per cent tolerance band set for the RBI, and analysts’ expectations of more such prints being in offing.
The SBI report said that there is a “50:50 probability” of the December hike being the final one in the current cycle, as it said that the terminal repo rate can be at 5.75 per cent as well.
The RBI hiked the benchmark policy rate by 0.25 percentage point to 5.50 per cent in October, its first hike in nearly four years, while signalling that further rate hikes could follow amid rising inflation, a weak rupee and high crude oil prices.
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SBI Research expects inflation to remain above 6 per cent in November before moderating thereafter. It said trends in the first two weeks of November’s price data from the Department of Consumer Affairs also indicate that
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