‘We Need 1% Increase Of Rates. 4 Rate Hikes Of A Quarter Each?’

The Reserve Bank of India (RBI) will have to increase the key rate by 1 percent if it aims to achieve zero percent real rate, said Uday Kotak, CEO of Kotak Mahindra Bank, on Sunday.

“Rbi policy:Sharp increase in inflation estimate to 5.7% from 4.5% assuming 100$ oil.Exit q4 fy23 estimate 5.1%. Present Repo rate at 4%. If India has to move to 0% real rate that is inflation – interest rate =0, we need 1% increase of rates. 4 rate hikes of a quarter each?” tweeted Kotak.

With no change this time as well, the repo rate currently stands at 4 percent. The reverse repo rate has been maintained at 3.35 percent.

Stating RBI’s agenda for this year, Das said that the central bank, after three years, has prioritised inflation control over growth taking note of inflation risks amid current international instability due to Ukraine-Russia war.

On inflation, Das said the spike in international crude oil prices was a substantial risk. A sharp rise in domestic pump prices could result in broad based second round price pressures, he added.

Feedstock pressures could continue and may have a spillover impact on poultry, dairy prices, said Das, who added that the financial market is likely to remain volatile.

The RBI said that the commencement of geopolitical tensions has led to tectonic shifts in global economy, adding that there are fears of deglobalisation.

“Conflict in Europe has potential to derail the global economy,” Das said.

He added that the approach needs to be cautious but proactive in mitigating impact on growth inflation and financial conditions.