Key indicator suggests RBI may go for another 35 bps rate hike before pause

The expectation of the RBI's rate hike cycle ending after December is further elucidated by a rare occurrence -- an inversion in the swap curve

Exactly a fortnight ahead of the Reserve Bank of India’s (RBI’s) next monetary policy review, a key market indicator of interest rates — the overnight indexed swap (OIS) — suggests that the central bank may tighten policy by 35 basis points and then refrain from further rate hikes.

RBI Deputy Governor Michael Patra recently described the OIS as the primary instrument for hedging interest rate risk in India. The six-member Monetary Policy Committee (MPC) of the RBI will meet on December 5-7.

Overnight indexed swaps, which are derivative products, were initially developed as a tool for investors to hedge their interest rate