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SBI Economists Forecast 0.50% RBI Rate Hike in December
The Reserve Bank of India raised an important interest rate on Wednesday.
The rate went up by 0.25 percentage points, to 5.50%.
It was the first increase in nearly four years.
Economists at SBI think the RBI may raise it again in December, this time by 0.50 percentage points.
They say rising prices and uncertain conditions around the world are reasons for a bigger increase.
SBI also said India needs a clear policy for artificial intelligence.
It suggested that this could help encourage money to flow into the country and support the rupee.
The rupee fell against the US dollar on Wednesday.
The Reserve Bank of India raised its repo rate by 25 basis points to 5.50% on Wednesday.
The increase was the RBI's first repo-rate hike in nearly four years.
SBI economists said the RBI could raise the rate by 50 basis points at its December policy review.
They cited rising inflation and said global conditions may become more volatile.
SBI also called for a clear artificial intelligence policy and other measures to support the rupee.
- Who
- The Reserve Bank of India and economists at the State Bank of India.
- What
- The RBI raised its repo rate by 25 basis points to 5.50%; SBI economists forecast a possible 50-basis-point increase at the December review.
- Where
- India.
- When
- The announced hike took place on Wednesday; the forecasted next hike would be considered in December.
- Why
- SBI economists cited a steepening inflation trajectory and potentially more volatile global conditions.
Key facts
- Current repo rate
- 5.50% after a 25-basis-point increase
- Next policy review
- December
- SBI economists' forecast
- A possible 50-basis-point rate hike
- Previous hike interval
- The Wednesday increase was the first in nearly four years
- Rupee movement
- The rupee depreciated by 43 paise and closed at 96.78 against the dollar on Wednesday
- Other recommendation
- SBI called for a clear artificial intelligence policy and measures to support the rupee
Quotes
SBI economists
Economists at the State Bank of India who authored the report.
“Given the steepening inflation trajectory currently underway, we believe that the December policy cycle could mostly deliver a jumbo 50 bps rate hike depending on the global conditions.”
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“Without a clear policy, capital flow is unlikely. Thus, the need of the hour is to provide guardrails for the rupee that is effectively moving towards a dreaded benchmark now.”
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Sources
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