RBI maintains a status quo on rate hike

Mumbai, June 08 RBI, on conclusion of three-day meeting of MPC today, decided to maintain a status quo of repo rate at 6.5 per cent.

Addressing immediately after MPC meeting, RBI Governor Dr Shaktikanta Das said, “India’s economic and financial sector remains resilient amidst global turmoil.”

Commenting on it, Dr VK Vijayakukar, Chief Investment Strategist at Geojit Financial Services says, “Even though the MPC’s rate decision and stance have come on expected lines as pause and withdrawal of accommodation respectively, the Governor’s commentary can be interpreted as positive.”

The central bank’s projection of FY24 CPI inflation has come at 5.1 per cent, lower than 5.2 per cent projected in the previous meeting.

This indicates that the MPC has come to the end of this rate hiking cycle. If the monsoon is normal and the global scenario is favourable, the MPC may think about a rate cut by end CY2023 or early 2024. From the stock market perspective, this is positive, he added.

RBI’s pause on rate hike gives some respite to prospective homebuyers looking to avail of home loans in the near future.

Anuj Puri, Chairman – Anarock Group, says, “The unchanged repo rate can help maintain the momentum in housing sales, which has so far been firing on all cylinders in 2023.”

As per Anarock Research, we saw housing sales in first quarter of 2023 scale new heights, breaching the one lakh mark at 1.14 lakh units across the top 7 cities, he said.

Given the current unchanged rates, the outlook for those looking to buy their first home via a home loan soon remains favourable. Interest rates from most banks will continue in single digits. With top banks, they currently hover between 8.7 to 9.65 per cent.

A future rate hike, if any, may push the rates into double digits. The persisting financial instabilities in advanced economies of the world may have repercussions in India, causing the RBI to take such a step to face these headwinds.