RBI monetary policy preview: Expect a rate hike despite bond turmoil

Even as the bond market is going through some turmoil, the Reserve Bank would still continue with its rate-hiking cycle, say economists.

At least a 25 basis points hike can be expected on the October 5 policy, economists said. There could also be a change in stance this time. The consumer price index-based inflation for August was at 3.69 per cent, lower than the RBI’s target of 4 per cent. On Wednesday, the rupee closed at 72.62 a dollar and the 10-year bond yields crossed 8 per cent-mark.

“The larger unattended question is on using monetary policy as a pincer movement: in terms of a more flexible and balanced approach responding systemically to episodes of current financial market volatility and sticking to price stability,” said Soumyakanti Ghosh, chief economist at State Bank of India group.

“This would mean a transparent evaluation of the existing policy framework,” Ghosh said.