Probability of RBI rate hike has increased, say experts

New Delhi, Apr 22: The Reserve Bank of India is expected to maintain status quo on policy interest rates in this financial year, but the probability of rate hike has increased, experts believe.
According to domestic as well as foreign brokerage firms like Kotak Institutional Equities and Morgan Stanley, the minutes of the RBI’s monetary policy committee (MPC) are “hawkish” and indicate a hike in key policy rates.
“While we continue to expect the MPC to maintain status quo in 2018-19, the probability of rate hike has increased after the minutes suggested that more members are inclined towards withdrawal of accommodation,” Kotak Economic Research said in a note.
The minutes of the April MPC meeting released by the RBI noted that RBI Deputy Governor Viral Acharya favoured withdrawal of monetary accommodation in the next policy review meeting scheduled on June 4-5.
Meanwhile, Executive Director Michael Debabrata Patra voted for an increase of 25 basis points in April itself, though the majority view of maintaining status quo prevailed.
Besides Patel, four other MPC members — Chetan Ghate, Pami Dua, Ravindra H. Dholakia and Acharya — had voted in favour of status quo in the repo rate.
The six-member MPC, headed by RBI Governor Urjit Patel, had left the benchmark repo rate unchanged for the third time in a row after deliberations on April 4-5, citing inflationary concerns.