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Business News/ News / India/  RBI Monetary Policy: Governor Shaktikanta Das hikes repo rate, raises inflation forecast
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RBI Monetary Policy: Governor Shaktikanta Das hikes repo rate, raises inflation forecast

RBI Monetary Policy: Governor Shaktikanta Das-led MPC has raised the repo rate by 50 bps

Reserve Bank of India (RBI) Governor Shaktikanta Das (ANI/RBI)Premium
Reserve Bank of India (RBI) Governor Shaktikanta Das (ANI/RBI)

RBI Monetary Policy: As widely expected, the Reserve Bank of India (RBI) has increased the repo rate by 50 bps to 4.90%, Governor Shaktikanta Das announced on Wednesday, in its fight to contain the soaring inflation. The rate hike comes after an off-cycle hike last month. Unveiling the third monetary policy for the current fiscal, Das said the Indian economy remained resilient, and the central bank will continue to support growth.

 

RBI had slashed the repo rate in March, 2020 with an aim to cushion the impact of covid-induced lockdown, and maintained status-quo in the benchmark interest rate for almost two years before increasing it on May 4, 2022.

08 Jun 2022, 11:55:54 AM IST

Expert view on RBI Monetary Policy

“The RBI has navigated a delicate situation of rising inflation, slowing growth and reducing liquidity among global uncertainties caused by Ukraine situation. 50 bps Repo rate hike and withdrawal of accommodation is continuity of policy and as per market expectations. The RBI will require all its skills and a little bit of luck to control inflationary expectations and support growth in the days to come," said Nilesh Shah, Group President & MD, Kotak Mahindra Asset Management Company.

08 Jun 2022, 11:41:26 AM IST

Rate hike impact on real estate

“We welcome the step of the apex body to increase the overall repo rates by another 50 basis points. This will help in clamping down inflation and smoothen economic growth. A rise in inflation can soften the stance on an otherwise robust real estate industry. Already raw material prices are increasing and an unbridled rate of inflation will further drive the input costs northwards, therefore resulting in cost overruns for the developer fraternity. In such a case they will have no option but to pass on the price to the homebuyers. Meanwhile, the government should also take concentrated efforts to reduce the spike in prices of raw materials such as cement, bricks, steel, etc. This will also give some relief to the sector," said Suren Goyal, Partner, RPS Group.

“For a few months, the inflation rate has been above 6%, which is beyond the RBI’s safe zone. If not controlled, the inflationary pressure could destabilize an otherwise bullish Indian economy. Although the recent step will increase the home loan rates, an unstable economy is not conducive to the overall health of the real estate industry. For the industry to operate optimally, it is important that the economy continues to grow in a stable, inclusive, and steady fashion," said Atul Goel, MD, Goel Ganga Group.

08 Jun 2022, 11:28:41 AM IST

If higher interest rates don't hurt growth, how will it help bring down inflation?

“Interestingly, while the RBI increases its FY23 inflation forecast to 6.7%, GDP growth projection is kept unchanged at 7.2%. We wonder that if higher interest rates don't hurt growth, how will it help bring down inflation? It also suggests that most of the excess inflation is due to global/supply-side factors. Since the RBI continues to forecast strong growth, it is very likely that it delivers another 25bps hike on 4th of August before it takes a pause. Our fear is that growth could see a serious deceleration in H2FY23 and FY24 on the back of such steep tightening and structural constraints," said Nikhil Gupta, Chief Economist, Motilal Oswal.

08 Jun 2022, 11:23:57 AM IST

Paving the way for a series of rate hikes

“Post the off-cycle announcement of a rate hike in May’22, paving the way for a series of rate hikes in the following meetings, the RBI increased the repo rate by 50bps. The MPC has decided to focus on calibrated withdrawal of accommodation while supporting growth. We believe the market had already discounted a rate hike of 40-50bps, and the key monitorable was a commentary on inflation. We may witness another rate hike, probably of a similar quantum, in the next monetary policy to manage inflationary pressures," said Naveen Kulkarni, Chief Investment Officer, Axis Securities.

08 Jun 2022, 11:14:33 AM IST

Rate hike in-line with expectations

“The June policy was a continuation of the off-cycle policy with the focus remaining squarely on inflation. The RBI’s decision of hiking repo rate by 50 bps as well as increasing inflation estimate by 100 bps were in line with market expectations. The tone of the policy continues to be hawkish and we expect the RBI to continue hiking repo rate to ensure a neutral to marginally positive real policy rate. We also expect another 50 bps hike in CRR to 5% by end-FY2023 to move the liquidity conditions towards the pre-pandemic levels," said Suvodeep Rakshit, Senior Economist at Kotak Institutional Equities.

08 Jun 2022, 11:10:09 AM IST

RBI's rate hike impact on MSMEs

"The RBI hike in repo rate was impending due to the inflation spike and global macroeconomic scenarios. The overall increase of ~ 1% in the cost of funds by the RBI over the last few months will impact the overall feasibility of large projects, infrastructure and long gestation projects. MSMEs, on the other hand, are recovering due to improved customer sentiment after nearly 2 years of uncertainty. MSMEs need more adequacy and certainty of funds versus costs alone and thus we believe they should be able to handle this increase, as long as this stays in this range for the medium term," said Manish Lunia, Co-Founder of Flexiloans.com.

08 Jun 2022, 11:06:32 AM IST

Views on RBI Policy rate hike

“With CPI forecasts at 6.7% from 5.7%, RBIs rate hike of 50bps came in line with market expectations and was taken into account by the market in the previous trading sessions. In an attempt to curb inflation, the expectations of this rate hike had been factored in the form of increase in bond yields, which might result in expensive borrowing for corporates. However, a consequent correction expected in raw material prices as a result of this announcement might provide a stable long term growth plan for the overall economy," said Shivam Bajaj, Founder & CEO at Avener Capital.

08 Jun 2022, 10:50:31 AM IST

Forex reserves

India's exports have performed exceptionally well. As on June 3, 2022, India's forex reserves stood at $601.1 bn: RBI Governor Shaktikanta Das

08 Jun 2022, 10:41:02 AM IST

E-mandate hike on cards

The Reserve Bank of India today announced increase in limit for e-mandates/ standing instructions on cards and Prepaid Payment Instruments (PPIs) for recurring transactions to 15,000, from 5,000 at present.

08 Jun 2022, 10:37:58 AM IST

Credit cards to be linked to UPI

Credit cards, starting with RuPay credit cards, can now be linked to the UPI (Unified Payments Interface) platforms, says RBI Governor. This facility would be available after the required system development is complete.

08 Jun 2022, 10:36:59 AM IST

Stock market reacts to RBI Policy outcome

Benchmark indices Sensex and Nifty50 trimmed day's losses while Nifty Bank index surged after RBI's repo rate hike announcement. The bond yield also rose

08 Jun 2022, 10:34:25 AM IST

100% limit hike for housing by cooperative banks

The Reserve Bank of India (RBI) has hiked the limit of individual loans extended by co-operative banks by 100%, announced governor Shaktikanta Das.

08 Jun 2022, 10:31:45 AM IST

Repo rate remains below pre-covid level

A normal monsoon, government measures will help to ease inflation, says RBI Governor, adding that the repo rate remains at below pre-pandemic level.

08 Jun 2022, 10:26:02 AM IST

Govt borrowing programme

We are monitoring G-Sec market very closely and will take measures, if required,  and is focussed on the orderly government borrowing programme, says governor Das while announcing the MPC meet outcome

08 Jun 2022, 10:21:34 AM IST

Inflation to remain elevated

RBI has increased FY23 CPI inflation forecast to 6.7% from 5.7%.

Inflation likely to remain above 6 per cent in first three quarters of current fiscal. “Our steps will be calibrated, focussed on bringing down inflation to target level," says RBI Governor.

 

08 Jun 2022, 10:17:38 AM IST

GDP growth forecast unchanged

RBI retains FY23 gross domestic product (GDP) growth forecast at 7.2%, with risks evenly balanced

08 Jun 2022, 10:14:57 AM IST

Recovery gaining momentum

India’s recovery has gained momentum. Started withdrawal of accommodation started during pandemic, says RBI Guv

08 Jun 2022, 10:12:20 AM IST

MSF and Bank rate increased

The central bank has decided to raise Marginal Standing Facility (MSF) Rate & Bank rate to 5.15% from 4.65%, announces governor Das

08 Jun 2022, 10:11:14 AM IST

Withdrawal of accomodation stance

RBI decides unanimously to keep policy stance ‘withdrawal of accommodation’

08 Jun 2022, 10:09:12 AM IST

Challenging times

“The Ukraine war has led to globalisation of inflation. During the challenging times, Indian economy has remained resilient. The MPC noted that inflation risk has intensified further," says RBI Governor

08 Jun 2022, 10:05:40 AM IST

RBI hikes repo rate

The Reserve Bank of India (RBI) has increased the repo rate by 50 bps to 4.90%

08 Jun 2022, 09:51:41 AM IST

Change in forecasts?

We do expect the RBI to change its inflation forecast by 70-80bps from 5.7% earlier citing the change in global and domestic price pressures. Although the growth forecast is expected to be kept unchanged at 7.2% for FY23: HDFC Bank Treasury Research Team

08 Jun 2022, 09:48:44 AM IST

Mint Views: Is RBI at risk of failure on inflation?

Its price stability framework was adopted in a 2016 push for Chicago school monetarism but its basic precept (‘inflation is always a monetary phenomenon’) appears to have worn thin under a covid crisis-driven reversal to India’s old mean on the role of monetary policy (‘supply-crunch inflation fought with tightening will choke growth’). The MPC call may offer clues of where the idea is headed, but even a 50 basis point repo hike will leave its key lending rate below its projected inflation for the year. Even with a big hike, oil uncertainty could put its 6% target beyond reach by end-October.

08 Jun 2022, 09:45:15 AM IST

RBI Policy Preview: Its all about the pace

At the upcoming policy meeting, the RBI is expected to raise the policy rate by 25 bps while continuing to keep its stance and the CRR rate unchanged. We tilt on the side of a 25 bps rate hike instead of 50 bps as we do not see a compelling case for a larger rate hike at this stage. For one, the central bank could take comfort from the recent measures announced by the government to combat inflation: HDFC Bank Treasury Research Team

08 Jun 2022, 09:43:56 AM IST

Not an easy job for RBI: Indranil Pan

“Not an easy job for the central banker. Recently released GDP data showed a sliding y-o-y growth for private consumption expenditure, an indication that economic activity remains slow. On the other hand, the inflation surprise has brought to the fore the need for the RBI to tighten monetary policy. The government has also joined the RBI in an attempt to contain inflationary pressures in the economy. We see the RBI extending its 40bps repo hike of May with a 35bps increase in June, followed by 25bps each in August and September," said Indranil Pan, chief economist at Yes Bank.

08 Jun 2022, 09:41:28 AM IST

RBI Policy: What to expect 

The central bank is also expected to raise its inflation projection for the current fiscal year to above 6%, given the recent increase in inflationary pressure. The RBI raised its inflation forecast for the current financial year to 5.7% in April, up from 4.5% in February.

RBI Governor Shaktikanta Das stated in a recent interview that rate hikes in June were a "no-brainer." While a rate hike is unavoidable, as Das stated, the question is by how much.

08 Jun 2022, 09:41:07 AM IST

Soaring inflation

Inflation above the 6% upper range prompted the central bank to raise rates in a surprise meet. India's retail inflation accelerated to an eight-year high in April, remaining above the central bank's tolerance limit for a fourth month in a row, and is likely to stay elevated.

08 Jun 2022, 09:41:07 AM IST

MPC Meet

The six-member Monetary Policy Committee headed by the RBI Governor Shaktikanta Das started deliberations on the bi-monthly policy review on Monday.

08 Jun 2022, 09:37:40 AM IST

Surprise hike

In a surprise move last month, RBI raised the repo rate by 40 basis points to 4.4% in an off-cycle hike, its first increase in borrowing rates since August 2018, to contain inflation.

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