[ad_1]
MUMBAI: The Reserve Bank of India (RBI) surprised markets by holding its key repo rate steady on Thursday after six consecutive hikes, saying it was closely monitoring the impact of recent global financial turbulence.
The central bank said its policy stance remains focused on “withdrawal of accommodation”, signalling it could consider further rate hikes if necessary. The pause in rate hikes is “for this meeting only”, said RBI Governor Shaktikanta Das.
Most analysts had expected one final 25 basis point hike in the RBI’s current tightening cycle, which has seen it raise the repo rate by a total 250 bps since May last year.
Here is what experts have to say on RBI’s surprise move:
Sakshi Gupta, Principal economist, HDFC Bank
Following in the footsteps of some recent global policy announcements (like the RBA), the RBI unanimously delivered a hawkish pause. Growth was revised up to 6.5% while inflation estimates were revised down. However, the governor highlighted that they will not refrain from taking further action if required, especially in light of the recent increase in oil prices and given core inflation remains elevated. We could see the RBI now going on an extended pause throughout FY24 while liquidity conditions continue to tighten. Short term yields could therefore continue to see some pressure.
Aditya Nayar, chief economist ICRA
Financial stability concerns appear to have pre-empted a pause as the MPC assesses the impact of its cumulative 250 bps of rate hikes. If inflation does not fall in line with the MPC’s assessment for Q1 FY2024, another hike could be in the offing, especially if the financial stability situation stabilises.
Radhika Rao, senior economist, DBS Bank
The RBI MPC surprised with a pause on Thursday but emphasised that the path ahead will be nimble to address evolving inflationary risks and maintained its hawkish stance. Tone on growth was upbeat, validated by a small upward revision to the FY24 growth target. Oil projection was cut, besides factoring in the assumption of a normal monsoon. With policymakers highlighting risks to global financial stability, the tightening cycle has likely slipped into an extended pause, barring unexpected shocks. Beyond anchoring inflationary expectations, the impact of tighter monetary policy on supply-side shocks, especially poor weather conditions, is limited, instead requiring administrative measures and fiscal support.
The central bank said its policy stance remains focused on “withdrawal of accommodation”, signalling it could consider further rate hikes if necessary. The pause in rate hikes is “for this meeting only”, said RBI Governor Shaktikanta Das.
Most analysts had expected one final 25 basis point hike in the RBI’s current tightening cycle, which has seen it raise the repo rate by a total 250 bps since May last year.
Here is what experts have to say on RBI’s surprise move:
Sakshi Gupta, Principal economist, HDFC Bank
Following in the footsteps of some recent global policy announcements (like the RBA), the RBI unanimously delivered a hawkish pause. Growth was revised up to 6.5% while inflation estimates were revised down. However, the governor highlighted that they will not refrain from taking further action if required, especially in light of the recent increase in oil prices and given core inflation remains elevated. We could see the RBI now going on an extended pause throughout FY24 while liquidity conditions continue to tighten. Short term yields could therefore continue to see some pressure.
Aditya Nayar, chief economist ICRA
Financial stability concerns appear to have pre-empted a pause as the MPC assesses the impact of its cumulative 250 bps of rate hikes. If inflation does not fall in line with the MPC’s assessment for Q1 FY2024, another hike could be in the offing, especially if the financial stability situation stabilises.
Radhika Rao, senior economist, DBS Bank
The RBI MPC surprised with a pause on Thursday but emphasised that the path ahead will be nimble to address evolving inflationary risks and maintained its hawkish stance. Tone on growth was upbeat, validated by a small upward revision to the FY24 growth target. Oil projection was cut, besides factoring in the assumption of a normal monsoon. With policymakers highlighting risks to global financial stability, the tightening cycle has likely slipped into an extended pause, barring unexpected shocks. Beyond anchoring inflationary expectations, the impact of tighter monetary policy on supply-side shocks, especially poor weather conditions, is limited, instead requiring administrative measures and fiscal support.
#experts #RBIs #decision #repo #rate #unchanged
