RBI may hike rate by 25bps; will it be last in this series?

Considering the Reserve Bank of India (RBI)’s discomfort with sticky core inflation, we think the monetary policy committee (MPC) will go for another 25 basis points (bps) rate hike in the February policy. The decision will obviously not be unanimous, but the resolution will still likely pass on a majority vote.

We also think the time has come for the MPC to consider changing the monetary policy stance from “withdrawal of accommodation” to neutral, as real rates have turned positive.