RBI Expected To Hike By 50bps

The RBI decision today is widely expected to deliver a rate hike, it is just a question of how much. The Bloomberg survey of 41 economists pencils in a 50bps hike.

• Still, there a wide variety of estimates, with 1 economist calling for 75bps and another 60bps. 11 economists forecast a 40bps move, while the remainder forecast moves between 25-35bps.
• A move greater than 50bps may be seen as jeopardizing the growth backdrop, which remains a key priority for Governor Das.
• A few economists expect the cash reserve ratio to rise, but the majority expect no change at 4.50%.
• The other focus point will be on the RBI's inflation outlook. We should see a rise in the current financial year projection (for end March 2023). The last projection of 5.7% looks too low, with most market economists expecting it to be raised above 6%. The latest headline inflation print was 7.80% YoY in April.
• Not much change is expected in terms of the growth outlook.