"Over the medium term, there could be two triggers - (a) slowdown in economies following the rapid rate hikes already undertaken by global central banks and further weakening in commodity prices, especially crude oil prices," said Sandeep Bagla, Chief Executive Officer of Trust Mutual Fund. "The benchmark bond yield could trade in the 7.25% to 7.50% band."
The RBI's minutes showed most members of the Monetary Policy Committee (MPC) feel price pressures in India remain high and it would be hasty to lower the guard on inflation. The central bank hiked its key repo rate for the sixth consecutive time earlier this month, taking it to 6.50%, and left the door open to more tightening. The RBI need not keep raising rates until prices fall as it risks overshooting the inflation-adjusted real rate, which at around 1% now is appropriate for the economy, said Ashima Goyal, an external member of the MPC. Risks to India's growth are higher than the risk of further inflation as major drivers of price increases are dissipating, justifying a pause in further rate hikes, Jayant Varma, another external member, said. Both of them voted against the recent rate hike.
The benchmark Brent crude contract eased 3% to around $80 per barrel, after the Federal Reserve stoked worries about the economy by suggesting further rate hikes ahead. The Fed's minutes of its latest meeting cemented bets that it will keep rates higher for longer. The central bank is expected to hike interest rate by 75 bps more. (Reporting by Dharamraj Dhutia Editing by Sonia Cheema)
