RBI Monetary Policy Compliance: The Reserve Bank of India on Wednesday announced a 25 basis point hike in the repo rate to 6.5%.

The decision was announced by RBI Governor Shaktikanta Das. The decision of the MPC was made by a majority of 4 out of 6 votes.

Das said that amid volatile global events, the Indian economy remains resilient.

To stay focused on housing output. Monetary policy has faced an unprecedented downturn in economic activity, followed by a surge in global inflation, he said.

Das added that there is an urgent need to strengthen global cooperation on the global fault lines that have emerged over the past few years.

RBI MPC: Home loan EMIs to rise after RBI hike

The decision of the six-member rate-setting commission was announced by the governor on Wednesday.

Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, said: “MPC delivers an increase in line with our expectations given the need to anchor inflationary expectations. A further increase in the need for action, as inflation remains above the medium-term target of 4%, signals that MACs are focused on inflation. Looking ahead, as inflation begins to ease, we expect real rates to reach close to pre-pandemic levels soon, and hence the need for gradual rate hikes remains limited. We expect an extended pause in rates with a likely repositioning in the upcoming April policy.”

As retail inflation shows signs of slowing down and remains below the RBI upper margin of 6%, as well as the projected slowdown in next fiscal year GDP growth starting in April, experts were of the opinion that the central bank could only opt for a 25 bps increase in the next fiscal year. year. key interest rate.

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Another view was that the RBI itself could press the pause button on the rate hike.

Sujan Khaira, chief economist and chief executive officer of Anand Rathi Shares and Stock Brokers, said the 25 basis point rate hike was in line with consensus.

“However, we felt there was at least a 50% chance of a betting suspension this time around. In terms of inflation, the major easing in India after April 2022 was the main reason for us to expect stagnation in this policy,” Khaira said.

Haira added that the RBI appeared to have been troubled by high and persistent core inflation for more than a year.

More importantly, the ongoing rate hikes by the Bank of England, the ECB and the US Federal Reserve, and their impact on the foreign exchange market, influenced the RBI’s decision to go for another rate hike.

“Based on an unexpected spike in inflation, we expect the RBI to keep its policy rate unchanged until the end of 2023. This will be positive for both the debt and stock markets,” Khaira added.

Meanwhile, the stock market opened higher on Wednesday as investors expected a smaller rate hike from the RBI, while stocks benefited from broader sentiment after markets treated comments by Federal Reserve Chairman Jerome Powell as dovish.

The Nifty 50 rose 0.2% to 17,757.10, while the S&P BSE Sensex rose 0.15% to 60,376.17 as of 09:16.

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The RBI was expected to likely raise rates by 25 basis points (bp) to mark the final hike in the current tightening cycle, and then pause until the end of the year, a Reuters poll showed, as retail inflation finally kicked in. within the central bank’s allowed range of 2%-6% in the last two months of 2022.

Rajeev Radhakrishnan, Chief Information Officer Fixed Income, SBI Muetual Fund, said the policies and recommendations are in line with expectations as rapidly changing external dynamics and still elevated core inflation are expected to limit any opportunity for concrete forward guidance.

“We expect this increase to be the last in this cycle with additional action to manage excess liquidity. The lag effect of previous actions and the cumulative tightening of monetary policy and liquidity should allow policy rates to gradually remain at the same level. GDP estimates for FY24, which are in line with the budget figures, are likely to remain at a higher level that could be reassessed as we move forward,” Radhakrishnan added.

The RBI raised its key interest rate by 35 basis points in December after three successive increases of 50 basis points and said its fight against inflation was not yet over.

The Fed’s Powell said Tuesday that disinflation has begun and that he expects inflation to fall significantly this year, raising hopes for less aggressive rate hikes going forward.

Wall Street closed higher yesterday, while the MSCI indicator of the broader Asia-Pacific Equity Index outside Japan rose 0.75%. [MKTS/GLOB]

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The Monetary Policy Committee (MPC), chaired by RBI Governor Shaktikanta Das, began its three-day meeting on Monday amid expectations of a modest 25 basis point rate hike or a pause in the rate hike that began last May to curb inflation.

In its December Monetary Policy Review, the central bank raised its key benchmark interest rate (REPO) by 35 basis points (bps) after three successive increases of 50 bps.

The RBI has increased its short-term lending rate by 225 basis points since May last year to contain inflation driven largely by external factors, especially the disruption to the global supply chain following the start of the war between Russia and Ukraine.

The RBI has been tasked with ensuring that retail inflation remains at 4 percent with a margin of 2 percent. However, it failed to keep the inflation rate below six percent for three consecutive quarters starting in January 2022.

However, consumer price index (CPI)-based retail inflation showed signs of slowing in November and December as it fell below the RBI’s 6% ceiling.

The MPC is composed of three RBI officers and three external members appointed by the central government.

External members are Shashanka Bhide (Honorary Senior Advisor, National Council for Applied Economic Research, Delhi); Ashima Goyal (Professor Emeritus, Indira Gandhi Institute for Development Studies, Mumbai); and Jayanth R. Varma (Professor, Indian Institute of Management, Ahmedabad).

In addition to the Governor, the group’s RBI officials are Rajeev Ranjan (Executive Director) and Michael Debabrata Patra (Deputy Governor).

(According to agencies)

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