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The Reserve Bank of India has hiked the repo rate by another 50 basis points. With this increase, the repo rate now stands at 4.90%.
The rate hike is on expected lines, given that retail inflation has remained above RBI’s comfort zone for some time now. Data released on May 12 showed that retail inflation jumped to a near-eight-year high of 7.79%.
This is the second-rate hike after RBI kept the rates unchanged for almost 2 years at 4%. In an unscheduled meeting on May 4, the central bank had increased the repo rate by 40 basis points.
Fund managers and economists believe that RBI will announce more rate hikes in coming months.
"FY23 could further see rates going up by 75 bps+, with the RBI now showing its intent to keep real rates neutral or above to quickly reach pre-Covid levels," said Madhavi Arora, Lead Economist, Emkay Global Financial Services.
"Upward revision in CPI (by 100 bps) to 6.7% suggests more rate hikes in are in the offing. For fixed income investors continue to stay at mid end of the yield curve on risk reward basis," said Lakshmi Iyer, Chief Investment Officer (Debt) & Head Products, Kotak Mahindra AMC.
