PremiumRBI Policy February 2023 Updates: The Reserve Bank of India hiked its key repo rate by 25 basis points (bps) on Wednesday as expected, saying core inflation remained high. The central bank said that its policy stance remains focused on the withdrawal of accommodation. In its December monetary policy review, the central bank had raised the key benchmark interest rate by 35 basis points (bps). Since May last year, the Reserve Bank has increased the short-term lending rate by 250 basis points, including today's, to contain inflation.
"The policy is exactly what the doctor ordered and is in line with expectations. Core inflation remains sticky and larger global central banks continue to raise rates and hence the RBI stance as well as the interest rate move may help break core inflation persistence and that in turn will strengthen the medium-term growth prospects of the Indian economy. The RBI raised FY23 growth projections by 20 bps to 7% and projected a growth of 6.4% for FY24 subject to a normal monsoon and crude price average of $ 95/bbl. Importantly, the RBI projects a much stronger growth in H1 FY24, averaging 7%. While the RBI is likely to remain on a pause now, we don’t expect any rate cuts in calendar 2023. The RBI will also need to remain vigilant of the spill over effects via INR given the weak external account and an accident-prone global economy. FPI selling continued in Jan 23 with a net outflow of $3 bn, said Dr. Sachchidanand Shukla, Chief Economist - Mahindra Group
"Despite this increase, a major concern for the RBI remains that core inflation is likely to remain sticky. This indicates that the RBI governor is cautious in taking any risk with inflation. Additionally, the Federal Reserve's stance of not taking a chance with inflation further strengthens RBI's resolve to be proactive. Therefore, we believe that in the next monetary policy, RBI may take the decision of another rate hike to keep the Indian Rupee stable," said Sunil Damania, Chief Investment Officer, MarketsMojo
“The RBI's upbeat projection on growth means ample demand and robust consumption in the economy. We foresee a minimal impact of today's hike on homebuyers' sentiment and expect home sales to continue without much of an effect. However, the benefits announced for taxpayers in the budget will balance out. We expect home sales to continue without much of an impact," said Nitin Bavisi, CFO at Ajmera Realty & Infra India Ltd
"The strength, size and the resilience of the Indian banking system now are much stronger and larger to be affected by a case like this," Das said without directly mentioning about the Adani Group
RBI Deputy Governor MK Jain says banks' exposure to Adani Group is not very significant
Indian banking sector, including NBFCs, continues to be resilient, strong: RBI Governor Shaktikanta Das on lenders' exposure to Adani Group, adding that RBI has made an assessment of lenders' exposure to Adani group firms; large exposure guidelines have been complied with by all banks
"With an MCLR rate of 8.4%, about 60% of the repo rate hike, so far, has already transmitted into the lending rates. Thus, the borrowing costs have significantly increased across the product categories including the housing sector. Post today’s rate hike, borrowing costs could be expensive by another 10 – 15 bps, on an immediate basis," said Shishir Baijal, Chairman & Managing Director, Knight Frank India
Shashanka Bhide, Rajiv Ranjan, Michael Debabrata Patra and Shaktikanta Das voted to increase the policy repo rate by 25 basis points. Ashima Goyal and Jayanth R. Varma voted against the repo rate hike
Shashanka Bhide, Rajiv Ranjan, Michael Debabrata Patra and Shri Shaktikanta Das voted to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth. Ashima Goyal and Jayanth R. Varma voted against this part of the resolution.
"With this hike, the one-year ahead estimated real repo rate will likely get fairly positive (implying a pause, although not necessarily an end to the cycle). We maintain that the RBI would not turn too restrictive but reckon the situation globally is fluid, and macro assessments might require appropriate adjustments ahead from the policy perspective. The extent of global disruption and disinflation will also remain key to the RBI's reaction function ahead," said Madhavi Arora, Lead Economist, Emkay Global Financial Services on RBI MPC
The minutes of the MPC’s meeting will be published on February 22, 2023.
The next meeting of the MPC is scheduled during April 3, 5 and 6, 2023
“Unless there is an unexpected flare in inflation, we would expect the Reserve Bank of India to maintain unchanged policy rate for the remainder of 2023. This would be positive both for the debt and equity markets," said Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares and Stock Brokers
"This seems to be final rate hike with inflation under control in coming days which is targeted for 4% in 2024. We could see rate reduction in later part of this year. There can be cheer in the capital markets," said Narinder Wadhwa, President at CPAI
RBI has decided to restore market hours for the Government Securities (G-secs) market to the pre-pandemic timing of 9 am to 5 pm
"We propose to permit lending and borrowing of g-secs (government securities). This will provide investors with an avenue to deploy their idle securities, enhance portfolio returns and facilitate wider participation. This measure will also add depth and liquidity to the g-sec market," Das
Core inflation remains sticky. Non-food credit growth was 16.7% from the year ago period as of Jan 27, 2023. We have to remain unwavering on bringing down CPI: Governor Das
Bonds fell, with the yield on benchmark 10-year bonds rising by as much as four basis points to 7.36%, as the policy likely belied expectations of a dovish pivot, whereas the rupee was trading higher
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RBI will launch a pilot project on QR code based coin vending machines in 12 cities
Know how how this repo rate hike decision by the central bank is going to impact your monthly EMI. Check the story here
Sensex was trading over 300 points higher whereas Nifty was up 0.6% after the RBI policy announcement
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Indian rupee remained least volatile among its Asian peers in 2022 and so far this year: RBI Guv
"The global economic outlook doesn't look as grim now as it did a few months ago, growth prospects in major economies have improved while inflation is on a descent though inflation still remains well-above the target in major economies"
Rate hike of 25 bps is considered appropriate at this juncture, monetary policy to remain agile, alert to inflation: RBI Governor
RBI projects retail inflation lower at 6.5% for FY23 from 6.7%; 5.3% for next fiscal
FY23 gross domestic product (GDP) growth estimate increased to 7% from 6.8%
RBI projects GDP growth at 6.4% for 2023-24
RBI to maintain strong vigil on evolving economic situation: Governor Das
SDF (Standing Deposit Facility) rate adjusts to 6.25% from 6%
MSF (Marginal Standing Facility) rates hiked by 25 bps to 6.75%
RBI's MPC to remain focused on the withdrawal of the accommodative policy: Das
Opportune moment to reflect on evolution of monetary policy. Unprecedented events of last few years have put monetary policy to test: Governor Das
RBI has hiked the repo rate for the sixth time in a row, by 25 bps to 6.50% with immediate effect
“Given, how well the RBI has controlled inflation in recent months, we anticipate that it will soon align with the government's preference for growth. Through recent reforms on taxation front, the government seems to have changed the rules to shift India's economy from one focused on savings to one driven by consumption. This week, a status quo is expected or at the best, one last hike and then rate hikes could be paused. We anticipate a halt in interest rate hikes in the subsequent next months, followed by the reversal in rates starting next year," said Umesh Kumar Mehta, CIO, SAMCO MF
The RBI is likely to raise rates by 25 basis points (bps) on Wednesday, to mark the final increase in its current tightening cycle, and then pause for the rest of the year, a Reuters poll showed
The Indian rupee rises 4 paise to 82.66 against US dollar in early trade, with traders weighing comments from Federal Reserve Chair Jerome Powell and awaiting the Reserve Bank of India's policy decision
“The MPC is likely to maintain its stance of “withdrawal of accommodation" and ease the pace of rate increases by RBI hiking rates by 25bps in Feb. Retail inflation is within the upper tolerance band of 6 percent and food inflation has eased off. Housing credit growth has been leading retail credit growth, rising by over 15%. As the market sentiment in the real estate sector in non-metro markets remains strong, demand is likely to offset the rate increase impact," said Ravi Subramanian, MD & CEO of Shriram Housing Finance
Benchmark indices Sensex, Nifty open with minor gains ahead of the Monetary Policy Committee (MPC) meet outcome
“We expect the RBI to hike repo rate moderately by 20 to 25 bps as inflation has softened to below 6% in the last two months. With inflation coming under control and reduced pace of US Fed rate hike, the focus of the RBI is now likely to shift towards maintaining growth, which can moderate in the coming financial year owing to global uncertainties. Thus, moderation in the pace of repo rate hike is pertinent to keep domestic demand afloat to support the economy," said Vivek Rathi- Director Research, Knight Frank India
Indian government bond yields are expected to remain largely unchanged in the early session on Wednesday as market participants await the RBI monetary policy decision as well as commentary on the interest rate trajectory
The Reserve Bank of India’s Monetary Policy Committee (MPC) will announce its decision on policy rates today. With the decline in inflation and an expected fall in exports, it may be time for the central bank to shift its policy approach towards growth. Mint explains here
Retail inflation rate eased down to 5.72% in December, staying within the RBI comfort range of 2%-6% for a second month. It was 5.88% in November, and 6.77% in October 2022
RBI's MPC is expected to hike repo rate moderately on Wednesday as inflation has softened to below 6% in the last two months
RBI Governor Shaktikanta Das will announce the Monetary Policy statement at 10:00 am on Wednesday, February 8, 2023
The six-member Monetary Policy Committee headed by the RBI Governor Shaktikanta Das started deliberations on the bi-monthly policy review on Monday
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