SBI’s ERD expects 25 bps repo rate hike each in Oct and Dec due to hardening crude oil prices, CPI inflation
SBI's Economic Research Department (ERD) anticipates two 25 basis point repo rate hikes, one each in October and December. This projection stems from hardening crude oil prices and incipient signs of generalization in CPI inflation. The ERD also highlighted global bond yields inching past decadal highs as a contributing factor. This forecast suggests sustained inflationary pressures domestically and globally are likely to influence the RBI's monetary policy decisions.
What this means
A repo rate hike would increase borrowing costs for banks, potentially translating to higher lending rates for consumers and businesses. This could impact credit demand and economic growth. Bond markets would react with further yield increases, affecting valuations and treasury portfolios.
Most affected: Lending rates, bond markets, credit demand
Key takeaway: Factor in potential increases in lending rates and higher cost of funds for future credit pricing and treasury management, preparing for a tighter monetary policy environment.
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