As probability of an interest rate hike by the ongoing MPC meet makes news, 10-year benchmark bond yield has surged to 2-week high levels of 7.9%. The elevated levels are a reflection of the fact that rate hike is already discounted by the bond market in all possibility.
In view of the various macro factors, rising crude oil prices, depreciating rupee which are putting a pressure on inflation as well as other important macros, the RBI is all set to raise interest rates by 25 basis points for the first time since January 2014. 1 basis point is one-hundredth of a percentage point. However, it is still to be watched whether the rate hike announcement will be made on Wednesday or August.
The monetary policy committee that determines the key interest rate or repo rate is meeting for its second bi-monthly monetary policy review meet on June 4, 2018 and the decision will be announced on June 6, 2018. This is the first time the committee will be meeting for three days instead of usual two days due to "administrative exigencies."