RBI may go for rate hike by 2018 Q4

NEW DELHI, Apr 08 (PTI): The Reserve Bank is expected to go for a hike in key policy rates by the fourth quarter of this year, as the country's economic recovery is likely to be be on a "surer footing" by then, says a Morgan Stanley report.

The global financial services major, expects the start of a shallow rate hike cycle by the fourth quarter of 2018.

"The key argument for the case for a rate hike by 4Q18 is two-fold, in that we don't expect a significant overshoot of inflation relative to the RBI's target and that the economic recovery will be on a surer footing by then," Morgan Stanley said in a research note.

The global brokerage, expects private capex to show signs of recovery by the end of this year.

"Against this backdrop of greater certainty and a more sustained recovery in growth, the central bank can then move to commence a shallow rate hike cycle," it said.

In the first bi-monthly monetary policy for 2018-19, the central bank left the repo rate unchanged at 6.0 per cent. The MPC maintained status quo for the fourth consecutive time since August last year.

Five members of the panel, including the RBI Governor, voted for a status quo while executive director Michael Patra was the lone member who wanted the key rate to be hiked by 25 basis points.