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RBI likely to hike interest rates this fiscal, next increase in August: DBS

Upside risks to inflation and a need to maintain financial markets' stability will keep monetary policy on a tightening bias.

Press Trust of India  |  New Delhi 

RBI
File photo of Reserve Bank of India

The is expected to go for further rate hikes this fiscal, with the next increase in key policy rates likely in the August policy review meet, says a research note.

According to the global financial services major, upside risks to inflation and a need to maintain financial markets' stability will keep on a tightening bias.

"We expect 50 bps more hikes in 2018-19, with the next likely in August," Radhika Rao, an economist with said in a research note.

The report said inflationary risks are building up and the key risks for the outlook include minimum support price increases, higher oil/fuel prices, weak rupee and fiscal conditions.

"Upside risks owing to the factors highlighted above, and a need to maintain financial stability will keep on a tightening bias. We expect 50 bps more hikes in FY19, with the next likely in August," the report said.

According to government data, rose to 5 per cent in June, a five-month high, despite easing food prices.

"Even as June likely marked the peak for inflation, with readings expected to moderate thereafter, the smaller extent of correction and firmer core pressures will be of concern for the central bank," the report said.

The government has mandated the Reserve Bank to keep inflation at 4 per cent, with a margin of 2 per cent on either side.

The Committee (MPC) will begin its three-day meeting on July 30 and announce its decision on the third bi-monthly policy of the current fiscal on August 1.

First Published: Fri, July 13 2018. 16:21 IST
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