MPC rate hikes likely to continue till CPI inflation recedes below 6%

Another rate hike predicted for September 2022, even if the quantum is as small as 10 bps

The Monetary Policy Committee (MPC) voted for a back-to-back repo rate hike of 50 basis points (bps) in its August 2022 policy review, with the anchoring of inflationary expectations taking centre stage. The CPI inflation and GDP growth projections for FY2023 were retained at 6.7 per cent and 7.2 per cent, respectively, with risks evenly/broadly balanced, while the stance was kept unchanged in a non-unanimous vote.

That the repo rate would be hiked was a foregone conclusion. However, the market was divided about the magnitude, with forecasts ranging from 25-50 bps. The actual size of the hike exceeded our own expectations