Next week, economists anticipate RBI to implement a further 50 bps increase.

SBI, UBS, Goldman Sachs, Barclays, and Bank of Baroda announced a 50 bps increase on September 30 . The central bank has no other option but to implement a 50 bps rate increase next week .

MUMBAI (MUMBAI): According to analysts, the central bank has no other option but to implement a 50 bps rate increase next week and raise the terminal rate to 6.25 per cent by December.In a rare unanimous call, economists from SBI, UBS, Goldman Sachs, Barclays, and the Bank of Baroda announced a 50 bps increase on September 30, raising the overall repo rate by 290 bps to 5.90 percent since May this year.In a detailed note on Monday, Soumya Kanti Ghosh, the group's chief economist at the world's largest lender SBI, said that an abrupt reaction to external shocks appears imminent.We expect the highest repo rate in the cycle to be 6.25 percent.

Liquidity has deteriorated after 40 months, he said, adding that this seems to be another headwind for the central bank, who may compel the RBI to continue supporting the market by altering the CRR and OMOs.Tanvee Gupta-Jain, the chief economist at UBS Securities India, said in the base case that she expects the MPC-RBI to frontload the rate hike cycle and raise the repo rate by another 50bps (compared to 35bps earlier) next week, raising the terminal repo rate to 6.25 percent (previously 6%) by December.On the plus side, she said the large current account deficit, rising CPI inflation, and a sluggish fiscal position are largely attributed to demand-side variables rather than tough credit conditions stifling domestic demand.Barclays India's chief economist Rahul Bajoria also raised the repo rate target to 50 bps next week (35 bps earlier) and 35 bps in the December meeting (25 bps earlier), with an upside risk to the target if commodity prices rise in Q4.

Because it believes that inflation has reached its peak, the British lender is calling for the MPC-RBI to change its stance to neutral on decreasing commodity prices.However, we think the MPC will stick to its front-loaded tightening cycle due to worse global economic conditions and high inflation.The chief economist at Bank of Baroda, Madan Sabnavis, said the recent growth in the forex market would require a higher amount of 50 bps to keep investor interest in other markets, as a 25-35 bps increase would have signaled that the RBI is optimistic that the worst of inflation has ended.Goldman Sachs Santanu Sengupta said that it also planned in a 50 bps increase (35 bps earlier) and a 35 bps increase in December (25 bps earlier), with a upside risk to the forecast if commodity prices rise in Q4.