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RBI likely to hike rates from first quarter of 2022: Report

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Brokerage firm Nomura says RBI may change its monetary policy stance in Q1 2022

Japanese brokerage firm Nomura on Monday said the Reserve Bank of India (RBI) may change its monetary policy stance and hike lending rates from the first quarter of 2022.

The apex bank will start moving towards normal liquidity inflows from this month, saying it will reduce the gap between the rate at which it funds the system and the rate at which it absorbs excess cash flows in December. Is.

A section of experts has seen the RBI’s move to infuse excess liquidity through the announced targets, a first step towards normalizing its policy stance, which has been quite favorable since last year, Which is meant to absorb the pressures created due to the onset of the coronavirus pandemic. The brokerage firm’s report noted.

Nomura raised its consumer price index inflation target for 2022 to 5.2 percent from the earlier 5 percent.

Demand in India remains strong, but there are supply-side headwinds in sectors such as chips that are plaguing the auto sector and coal shortages threaten to darken parts of the country.

There is acute shortage of coal in the country and power companies are facing prospects of importing coal at high cost and the demand for power is expected to increase in the coming days due to the festive season, the risk from supply side crunch may be less. As for the pace of development, Nomura warned in its report.

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