The Reserve Bank on Wednesday hiked key benchmark policy rate by 25 basis points to 6.5 per cent, citing sticky core inflation. This is the sixth time interest rate has been hiked by the Reserve Bank of India (RBI) since May last year, taking the total quantum of hike to 250 basis points.
More rate hikes are likely to bring down inflation, said the US Federal Bank Chairman Jerome Powell in an interview with billionaire businessman David Rubenstein on Tuesday.
Speaking in an interview to CNBC-TV18, after the announcements, Chetan Ahya, Chief Asia Economist at Morgan Stanley said that the US Federal Reserve may go for two more rate hikes but RBI likely to be done.
He said, “The markets are pricing in about two more rate hikes from the Fed. We have also raised our forecast, and we also think the Fed will take up two more rate hikes.”
Ahya also discussed the recent actions of the RBI, stating that he believes the RBI has peaked with its recent rate hike. Despite this, he believes that inflation in India will remain in the range of 5-5.5 percent. Additionally, he thinks that the RBI may remain patient and not necessarily achieve its 4 percent inflation target for the next fiscal year.
“We do think that inflation in India will remain in the range of 5-5.5 percent and there is some base effect, so in the month of March, April, May, you will see decelerate a lot more and then stay back in that range of 5-5.5 percent. And that has been our view for some time rather and we don’t see a need to change that at this point of time,” he said.
According to him, growth in Asia is going to be relatively strong. He further said that there will be 500 points of differential growth rate between Asia and US.
“Our view is that growth in Asia is going to be relatively strong and growth differentials between Asia and US will continue to widen going forward,” Ahya said.
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