The Reserve Bank's rate setting panel is likely to opt for slowing down the pace of hikes and increase the repo rate by 0.25 per cent in September, Deutsche Bank said on Monday.

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The central bank has already hiked the repo rate by 1.40 per cent in three consecutive actions since May this year, in response to the uncomfortably high inflation which has been consistently breaching upper end of the tolerance band set by the government to the RBI.

In a report, the Germany-based bank said the RBI will respond with a slower pace of rate hikes from here, basing the expectation on the recently released minutes of the last meeting of the Monetary Policy Committee (MPC).

It pointed to Governor Shaktikanta Das' statement, where he wrote that actions will be "calibrated, measured and nimble" as one of the most important factors.
RBI's executive director Rajiv Ranjan, who is also a member of the MPC, suggests a similar outcome, the report said.

"The frontloading of policy actions is expected to strengthen monetary policy credibility and temper the need for aggressive rate hikes in future," Ranjan said in his statement, as per the report.

Deputy Governor Michael Patra also hints at similar measure, the bank said.

"With RBI having delivered significant front-loaded rate hikes thus far, we think the central bank can now resort to hiking rates in clips of 0.25 per cent, particularly if the (US) Fed reduces its pace of rate hike to 0.50 per cent from September onwards," the report said.

There has been precedence of RBI having hiked the repo rate by 2 per cent to 6.75 per cent within one fiscal year (FY11), following it up with another 1.75 per cent in the subsequent year (FY12) to take the repo rate to 8.50 per cent.

In a report, domestic brokerage Kotak Securities said the MPC minutes released over the weekend make it clear that there is a need for further rate hikes to ensure monetary policy credibility.

"We retain our view of the repo rate at 5.75-6 per cent," it said.

Emkay Global said that the policy rate will terminate at around 5.75 per cent with the central bank showing its intent to keep real rates near the estimated natural rate.