RBI may go for 3 rate hikes from December quarter, says Morgan Stanley report

New Delhi: The Reserve Bank of India is expected to begin its rate hike cycle from December quarter, and may go for three rate hikes by 2019 taking the key policy rate to 6.75 percent, says a Morgan Stanley Report.

According to the global financial services major, a significant overshoot of inflation relative to RBI's target is not likely. Moreover, the economic recovery will be on a surer footing by the fourth quarter of 2018 and this might prompt the central bank to go for a rate hike.

"With end demand holding up well, private capex appears poised for a recovery later this year," Morgan Stanley said in a research note.
It further noted that, "as the economy enters into a full-fledged recovery, we expect the central bank to embark on a shallow rate hike cycle beginning October-December of 2018."

The report said a recovery in private capex is likely later this year and this will boost economic growth.

"We maintain our expectation for a recovery in real GDP growth to 7.5 per cent in 2018 and further to 7.7 percent in 2019, from 6.4 percent in 2017," the report said.

RBI. Representational image. Reuters

RBI. Representational image. Reuters

Over 2018-19, Morgan Stanley has pencilled in a total of only three rate hikes, taking the terminal policy rate to 6.75 percent.

"We expect RBI to commence its rate hike cycle from the fourth quarter of 2018 , as we think that the MPC does have time to pause and assess more incoming data before acting in the December quarter," the report noted.

In its first bi-monthly monetary policy for 2018-19, RBI left repo rate unchanged at 6 percent. The MPC maintained status quo for the fourth consecutive time since August last year.

Updated Date: May 14, 2018 15:16 PM

Also Watch

IPL 2018: Royal Challengers Bangalore eye revival against Chennai Super Kings as 'Cauvery Derby' comes back to life
  • Thursday, April 26, 2018 In the Kanjarbhat community, a campaign against 'virginity tests' is slowly gaining ground
  • Tuesday, April 24, 2018 It's A Wrap: Beyond the Clouds stars Ishaan Khatter, Malavika Mohanan in conversation with Parul Sharma
  • Monday, April 9, 2018 48 hours with Huawei P20 Pro: Triple camera offering is set to redefine smartphone imaging
  • Monday, April 16, 2018 Rajyavardhan Singh Rathore interview: Sports can't be anyone's fiefdom, we need an ecosystem to nurture raw talent