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MNI RBI Preview - December 2022: Resilient Growth Backdrop Points To A 35Bps Hike

The RBI is likely to down step the rate hike pace at the December policy meeting, but only modestly to 35bps, from 50bps previously.

EXECUTIVE SUMMARY

  • On balance we see risks tilted towards a 35bps move. In our view the resilient growth picture painted by the Q3 GDP figures suggests the RBI can still tighten by this amount without fear of derailing the economic recovery too much. Such a move should send a signal to the domestic market that the RBI wants to ensure inflation returns to target as we move into 2023.
  • Domestic food prices suggest there is further relief coming from a headline inflation standpoint. However, the RBI may remain wary of sticky upside inflation pressures as we move into 2023, particularly with a still reasonable growth backdrop.
  • Some RBI members argued in September for a reduced pace of tightening (35bps instead of the 50bps delivered). Such voices may grow louder at this policy meeting, given the inflation pressures aren’t continuing to trend higher, while offshore conditions have also turned more supportive of less hawkish RBI action.
  • Click to view full preview:
  • RBI Preview - December 2022.pdf


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EXECUTIVE SUMMARY

  • On balance we see risks tilted towards a 35bps move. In our view the resilient growth picture painted by the Q3 GDP figures suggests the RBI can still tighten by this amount without fear of derailing the economic recovery too much. Such a move should send a signal to the domestic market that the RBI wants to ensure inflation returns to target as we move into 2023.
  • Domestic food prices suggest there is further relief coming from a headline inflation standpoint. However, the RBI may remain wary of sticky upside inflation pressures as we move into 2023, particularly with a still reasonable growth backdrop.
  • Some RBI members argued in September for a reduced pace of tightening (35bps instead of the 50bps delivered). Such voices may grow louder at this policy meeting, given the inflation pressures aren’t continuing to trend higher, while offshore conditions have also turned more supportive of less hawkish RBI action.
  • Click to view full preview:
  • RBI Preview - December 2022.pdf