The Reserve Bank of India (RBI) is likely to dial down the pace of interest rate hikes to 25-35 basis points on Wednesday amid growth concerns and retail inflation showing signs of a climbdown.

So far this year, the monetary policy committee (MPC) has raised the policy repo rate by 190 basis points beginning with a 40--basis-point increase in May and three consequent 50-basis-point hikes. The repo rate which determines borrowing costs in the economy now stands at 5.90 per cent.

The RBI action was necessitated by stubborn inflation which has been above the upper bound of 6 per cent since January. Retail inflation moderated to 6.77 per cent in October against 7.41 per cent in the preceding month. Analysts expect a further decline because of the cooling down of crude oil and other commodity prices.

Though the Indian economy has shown resilience, growth worries have resurfaced, and analysts fear aggressive central bank action could nip any early recovery.

At the MPC itself, at least two members had cautioned against any more forceful moves: Ashima Goyal and Jayanth Verma.

According to the minutes of the last MPC meeting in October, Goyal said large hikes were required to reverse the steep pandemic-time cuts and since that has been completed, going slow hereon will allow the policy to be agile and data-based. “Extremes are always dangerous,’’ she had said at the meeting.

Varma has said the policy rate hikes had not impacted the real economy. They have not been transmitted to even the broader spectrum of interest rates such as deposit rates. If the RBI continues to tighten, it would run the risk of overshooting the repo rate needed to achieve price stability. Varma had called for a pause, though he voted for a 50-basis-point increase at the last meeting.

Economists said second-quarter GDP data has reflected some of these concerns. India’s economic growth slowed to 6.3 per cent in Q2 from 13.5 per cent in the previous three months, pushed down by the manufacturing and mining sectors.

“The momentum of the recovery is still below full strength, warranting policy support and push of government capex. Global price disruptions point to a confluence of China’s slowdown and demand-curbing global policy actions. These pose downside risks to domestic economic activity,” economists at Emkay Global said in a recent report.

The brokerage retained its GDP growth forecast of 7 per cent for the current fiscal though it cautioned against rising downside risks to this projection.

Madan Sabnavis, chief economist, of Bank of Baroda, said the RBI will be presenting the monetary policy against the backdrop of GDP growth slowing down as well as inflation at above 6 per cent.

“We do believe that the MPC will continue with rate hikes this time though the magnitude will be lower — probably 25-35 basis points. We do believe that the terminal repo rate for the financial year will be 6.5 per cent, which means there will be one more rate hike in February,’’ he said.

The 190-basis point increase by MPC has led to moderation calls from the industry. Last week, Assocham urged the RBI to lower the pace of hikes so that it does not have an adverse impact on the nascent economic recovery. The rate hike should not exceed the 25-35-basis-points band, the chamber said.

Shanti Ekambaram, the whole-time director, of Kotak Mahindra Bank, said the RBI has been keeping a close tab on growth and inflationary trends. Future action will be based on data prints on both growth and inflation.

“We expect a lower rate hike — 25 to 35 basis points — from the RBI and MPC given the last lower inflation reading and a slight softening in Fed speak. As on expected lines, inflationary trends would start showing a decline in the fourth quarter of the current fiscal,” Ekambaram said.