With inflation showing no signs of slowing down, the Reserve Bank of India (RBI) is expected to hike the benchmark lending rate in its upcoming monetary policy review on Wednesday, a clue for which has already been given by Governor Shaktikanta Das, said experts.

The central bank is likely to go for at least a 35 basis points (bps) hike following the 40 basis points hike announced last month after an off-cycle Monetary Policy Committee (MPC) meeting. Experts anticipate more hikes in repo rate in the coming months, reported PTI.

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Monetary Policy Committee’s three-day meeting, headed by Governor Das has already started on Monday, June 6. RBI Governor Shaktikanta Das will announce the decision of the MPC after meeting, on Wednesday.

The retail inflation, which RBI considers while arriving at its monetary policy, surged for a seventh consecutive month to touch an 8-year high of 7.79% in April, mainly on account of rising fuel and commodity prices, due to the ongoing Russia-Ukraine war.

The wholesale price-based inflation has stayed in double digits for 13 months and hit a record high of 15.08% in April.

Recently in an interview, the governor said “expectation of rate hike is a no-brainer, there will be some increase in the repo rates, but by how much I will not be able to tell now but to say that 5.15 may not be very accurate”.

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On expectation from the MPC, Madan Sabnavis, Chief Economist, Bank of Baroda, said the credit policy to be announced will be crucial for the point of view of not just rate action but also the RBI’s thoughts on growth and inflation.

“The increase in repo rate can be taken as almost given but the quantum may not be more than 25-35 bps as the earlier minutes of the meeting held in May indicated that the MPC was not in favour of a large increase in repo rate at one shot,” Sabnavis said.

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The government has taken several measures, including a duty cut on motor fuel, a reduction in import duty on certain edible oils, and a banning of wheat export, in an attempt to control the inflation.

In a report, BofA Securities said it expects RBI MPC to increase the repo rate by 40 basis points in June and 35 basis points in August.

“We see the RBI MPC revise up their inflation forecast, retain growth estimate and stance focusing on withdrawal of accommodation,” it added.

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Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com and Makaan.com, said that he expects RBI to raise the repo rate once again to contain inflation which is largely being driven by global factors such as the Ukraine war.

“At this juncture, we can understand the compulsion of the RBI to raise interest rates. However, the hike should be gradual as it could impact the growth of the real estate sector which is a major driver of the economy,” he said.

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The June MPC meeting is certainly expected to see a rate hike, with only the quantum in question, said Rakesh Kaul, CEO of Clix Capital.

He further added, “Unfortunately, with a twin deficit – in both fiscal as well as current account-persistent and rising inflation, as well as the Federal Reserve, increasing rates and likely to continue tightening, the only way out for RBI is to raise the interest rates”.

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The government has directed the Reserve Bank with ensuring consumer price index-based inflation remains at 4% with a margin of 2% on either side.