Chennai, Dec 6 With the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) expected to revise upwards the interest rate on Wednesday, industry players are voicing out for a moderation.
The MPC has hiked the interest rate in recent times by 190 basis points (bps) to contain the inflation.
According to Shishir Baijal, Chairman and Managing Director, Knight Frank India, out of 190 bps repo rate hike, 105 bps rise has already been transmitted in the marginal cost of funds based lending rate ( MCLR).
"The mortgage rates have increased in line with the MCLR and the cumulative growth in residential sales in the last six months have understandably begun showing some signs of slowing," Baijal said.
According to Baijal, the affordability of the home buyers has also reduced by 10 per cent since the beginning of this interest rate hike cycle.
Referring to the Q2 FY23 GDP print, Baijal said except for the service sector, a degrowth was seen in most of the core sectors such as industry, manufacturing and others.
"Hence, with inflation potentially showing signs of ebbing and growth concerns coming to the fore, we expect the RBI to hike its repo rate by a comparatively subdued 30-35 bps in the upcoming MPC meeting," he added.
Industry lobby body Assocham recently had made a similar request to RBI Governor Shaktikanta Das.
At most, the new rate hike should not exceed the 25-35 bps band, Assocham said in a letter to Das.
Several economists too have said the repo rate hike will be in the 25-35 bps band.
According to a report from State Bank of India (SBI), the RBI rate hike will be in smaller magnitude attuned to emerging market central banks and the overall rate setting tone.
"A 35-bps repo rate hike looks imminent. We believe at 6.25 per cent, it could be the terminal rate for now," the SBI said.
"With a fall in commodity prices and some early signs of inflation coming down, the RBI may choose to slow down the pace of rate hikes. We expect the RBI to deliver a lower rate hike of 25 basis points in the upcoming meeting," Pankaj Pathak, Fund Manager - Fixed Income, Quantum Mutual Fund said.
Monetary policy often works with a long lag. The impact of past rate hikes and liquidity tightening measures is yet to be seen. Thus, there is a risk of over-tightening the monetary policy and hurting growth recovery at a nascent stage, Pathak added.
Expecting the RBI to be more data-dependent and reactive going forward than raising rates pre-emptively, Pathak also said there is a strong case for the former to take a pause and allow the past rate hikes to work through the real economy.
Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor