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Will it be 50 basis points? Will it be 35 basis points? Or will the Reserve Bank of India spring a surprise on Friday? All eyes are on the interest rate decision from India's Monetary Policy Committee of the Reserve Bank of India.
However, more than the quantum, Sanjeev Prasad of Kotak Institutional Equities is focused on the pace of rate hikes. He expects the RBI to raise interest rates at a faster rate than earlier envisaged.
The Monetary Policy Committee began a three-day deliberation on Wednesday, as central banks around the globe face the Herculean task of taming sticky consumer inflation without causing an economic slowdown. Economists expect the central bank's top brass — responsible for changes to key interest rates — to announce an increase in the repo rate.
In a conversation with CNBC-TV18, Prasad said that the strength of the US Dollar will force every other central bank to manage the external situation and their respective currencies. "It is just not a case of inflation, it is also the external situation and the hemorrhaging which the currencies are facing against the US dollar that they have to manage," he said.
Prasad now expects policy rates to be around 6.5 percent, provided oil prices remain steady.
Prasad was hopeful that Food inflation would cool down in the second half of the year, which has not happened yet. As a result, he also expects India's CPI to remain higher than previously envisaged.
For more details, watch the accompanying video