The Reserve Bank of India’s key policy repo rate was raised by 50 basis points on Friday, the third increase in as many months to cool stubbornly high inflation.
With June retail inflation hitting 7%, economists polled by Reuters had expected another rate hike, but views were widely split between a 25-bp move or a 50-bp increase.
The monetary policy committee (MPC) raised the key lending rate or the repo rate to 5.40%. The Standing Deposit Facility rate and the Marginal Standing Facility rate were accordingly adjusted higher by the same quantum to 5.15% and 5.65%, respectively.
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, Mumbai
“The MPC’s decisions have been in line with our expectations. Given the increasing external sector imbalances and global uncertainties, the need for front-loaded action was imperative. We continue to see a 5.75% repo rate by December 2022.”
Garima Kapoor, Economist, Institutional Equities, Elara Capital, Mumbai
“To rein in inflationary pressures and anchor inflation expectations, the MPC hiked the repo rate by 50 bps and retained its stance on withdrawal of accommodation.”
“After today’s policy, we expect a hike of another 25 bps and expect MPC to become data-dependent while it assesses the impact of recent hikes on inflation. Amid signs of a peak out of DXY and encouraged by the recent sharp correction in global commodity prices, we expect the rupee to remain supported in the rage of 79-80.5 even as high trade deficit prints remain a risk.”
“As risks of a global slowdown get priced in, the 10-year yield is likely to oscillate in the range of 7.15 to 7.35… in tandem with movements in global yields.”
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