In the last 24 hours speeches by several Federal Open Market Committee (FOMC) members have turned even more hawkish. Three fed members Lael Brainard, Mary Daly and Esther George spoke of 50 basis point rate hikes in May and faster reduction of the fed's balancesheet.

This has pushed the US 10-year yield to a 3 year high of 2.6 percent and the dollar index to a 2 year high of 99.63 with concomitant impact on equities globally. How will this rising fed hawkishness impact the RBI's policy coming up on Friday to discuss this CNBC-TV18’s Latha Venkatesh spoke to Santanu Sengupta, India Economist at Goldman Sachs.

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Sengupta said that their US economics team expects additional 200 basis points of Fed rate hikes in 2022. He expects one or more less dovish statements, in the April policy statement and their inflation forecasts are materially higher at closer to 6.50 percent for fiscal Year 23.

On RBI rate hike he said, “Our expectation is that they start off with the hiking cycle in the second half of the year, August policy onwards. So August onwards, we are pencilling in 25 basis points in each of three policies. So we are expecting in Q3 of FY, which is October and December policy, 25 basis points of hike each after 25 basis points of hike in August and we would expect one in the February policy as well. So, for FY23, although they are starting late, we are expecting 100 basis points of hike in the fiscal year.”

For full interview, watch accompanying video

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First Published:Apr 6, 2022 11:43 AM IST