RBI raises Repo rate by 25 basis points
On completion of its three-day branstorming meeting of MPC, the RBI raised repo rate by 25 basis points today.
image for illustrative purpose
Mumbai, Feb 08 On completion of its three-day branstorming meeting of MPC, the RBI raised repo rate by 25 basis points today. It was in the wake of the fact that MPC voted with 4:2 majority to raise repo rate. Post hike, the revised repo rate now stands at 6.5 per cent.
This step of RBI comes after the apex bank having raised interest rates to the tune of 225 basis points in the current fiscal.
RBI Governor, Dr Shaktikanta Das, in his speech immediately on conclusion of the MPC meet, said, "The stance focused on withdrawal of accommodation policy."
MPC voted with 4:2 majority to raise repo rate. SDF rate will stand revised at 6.25 per cent. Moreover, MSF rate will stand revised at 6.75 per cent.
According to Das, "Global economic outlook does not look as grim as few months ago. Growth prospects in major economies have improved as inflation is on a descent. US dollar has retreated sharply from 2-decade highs
Talking to Bizz Buzz, Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares and Stock Brokers, says, "The 25 basis points rate hike by the Reserve Bank of India today has been in line with the consensus expectations. We, however, felt the possibility of a rate pause this time around was at least 50 per cent."
On the inflation front, the major softening in India post April 2022 was there main reason for us to expect a standstill in this policy. On the contrary, the Reserve Bank of India seems to have been more bothered about the high and sticky core inflation for more than a year.
More importantly, the continued rate hikes by the Bank of England, the ECB, and the US Federal Reserves and the implications of these in the foreign exchange market influenced the decision of the Reserve Bank of India to go for another rate hike. Unless there is an unexpected flare in inflation, we would expect the Reserve Bank of India to maintain an unchanged policy rate for the remainder of 2023. This would be positive both for the debt and equity markets, Hajra said.
The MPC's growth outlook for H2 FY2024 is higher than our projections, albeit similar to our assessment of the potential GDP growth. This may have fed into the Committee's higher than expected inflation projection for that period, underpinning the continued cautiousness signaled by the unchanged stance.
Aditi Nayar, chief economist, ICRA, said, "With the stance continuing to focus on withdrawal of accommodation, the window remains open for further rate hikes if inflation exceeds the MPC's projections. We expect the MPC to remain vigilant and data dependent in FY2024."
