RBI Rate Hike: Japanese brokerage firm Nomura said on Monday that the Reserve Bank of India (RBI) may change its monetary policy stance and hike interest rates from the first quarter of 2022. The central bank will start moving towards normal liquidity flows from this month. Having said that it would reduce the gap between the rate at which it funds the system and the rate at which it absorbed the excess cash flows in December.
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 soak in the pressures created by 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 remains strong in India, 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 higher 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.
