RBI Monetary Policy | Reactions From Industry Experts After Central Bank Raises Repo Rate By 50 Bps
India's GDP growth forecast at 7.2 per cent as the economy is still grappling with high inflation, said Governor Shaktikanta Das
The Reserve Bank of India’s (RBI's) Monetary Policy Committee (MPC) on Friday announced a 50 basis point hike in the repo rate to 5.40 per cent.
RBI Governor Shaktikanta Das, who headed the six-member MPC, in his speech cited continued upside risks to inflation. He said the MPC decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.
The central bank's MPC has retained India's GDP growth forecast at 7.2 per cent as the economy is still grappling with high inflation, Das said. The standing deposit facility (SDF) rate stands adjusted to 5.15 per cent and the marginal standing facility (MSF) rate and the bank rate to 5.65 per cent.
This is be the third consecutive hike in the repo rate in the past three months.
In the following are some key reactions from the experts:
RBI MPC voted unanimously hike repo rate by 50 bps to 5.4 per cent - taking to pre pandemic levels. RBI MPC is line with our expectations. Inflation seems to be at the forefront of the move as they maintained CPI forecasts intact at 6.7 per cent for FY 23. To us, this means we are not done with rate hiking cycle yet and we could brace for continued northward journey in rates. Withdrawal of accommodative stance has been maintained. We see this as a “no dovish” undertone policy contrary to markets expecting a dovish stance. Bond markets would now focus on incremental gsec supply and take cues from global bond yields going forward. Staggered investment approach in fixed income stays.
- Lakshmi Iyer, chief investment officer (Debt) and head products, Kotak Mahindra Asset Management Company
The MPC decisions have been in line with our expectations. Given the increasing external sector imbalances and global uncertainties the need for frontloaded action was imperative. We continue to see 5.75 per cent repo rate by December 2022.
- Upasna Bhardwaj, chief economist, Kotak Mahindra Bank
The RBI’s 50bp hike was largely in line with market expectations that was divided between it and a 35bp hike. Very importantly, with the RBI retaining the policy stance of “withdrawal of accommodation”, the implicit message is that rates are yet to reach neutral territory, and that more rate hikes are warranted – a view that we agree with. The RBI continues to signal that all options are on the table, which is a prudent strategy given the elevated levels of uncertainties on both, growth as well as inflation.
- Dr Aurodeep Nandi, India economist and vice-president, Nomura
The RBI hikes the repo rate by 50bp to 5.4 per cent, more than the consensus (5.25 per cent) and our expectation (5.15 per cent). Further, there was no change in the stance or any relief in the Governor's statement, indicating a possible pause in the next policy. The rate decision was also taken unanimously today.
- Nikhil Gupta, chief economist, MOFSL Group
The MPC's actions are in line with the current global inflation scenario and has leaned in favour of anchoring inflationary expectations to work out solutions to decipher the growth potential of the economy. The tone of the policy continues to be aggressive. The hike in repo rate by 50 basis points to 5.4 per cent to pre-pandemic levels does not come as a surprise. RBI’s actions and efforts are to largely surmount the global headwinds that are driving inflation and to ensure inflation remains within target going forward.
- Sanjay Palve, senior managing director, Essar Capital Ltd
"With the cumulative rate hike until today, assuming complete transmission, a prospective home buyers’ affordability shrinks by around 11 per cent i.e. from an ability of purchasing a house of Rs 1 crore value shrinking to Rs 89 lakh now."
- Shishir Baijal, chairman and managing director, Knight Frank India
The RBI delivered a textbook policy announcement today – one that is frontloaded and aggressive in response to inflation that remains high while the growth momentum remains reasonably positive. Accordingly, the RBI kept its inflation forecast unchanged at 6.7 per cent, sounding caution on uncertainty around inflationary pressures despite the recent moderation in global crude oil and metal prices. The central bank kept its stance unchanged at 'withdrawal of accommodation' signalling yet again that the notion of stance is being defined by the liquidity in the system and in turn the overnight rate.
- Abheek Barua, chief economist & executive vice-president, HDFC Bank
Trending News
Top Headlines
