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RBI MPC Meet Highlights: Repo Rate Hiked by 50 bps; Inflation-Growth Dynamics to Decide Further Course, Says Guv Das

RBI MPC Meet LIVE Updates: Reserve Bank of India’s Monetary Policy Committee (MPC) decided to hike the Policy Repo Rate by 50 basis points to 4.9 per cent. Das also said that linking of RuPay credit cards to UPI will now be allowed. | June 08, 2022, 15:46 IST
RBI Shaktikanta Das

RBI MPC Outcome: Reserve Bank of India’s Monetary Policy Committee (MPC) decided to hike the Policy Repo Rate by 50 basis points to 4.9 per cent in its June meeting. RBI Governor Das said that MPC members voted unanimously to hike rates and to continue the withdrawal of the accommodative stance. MPC noted that inflation is likely to remain above the 6 per cent mark for the first three quarters of the current financial year. Read More

Jun 08, 2022 15:46 IST

RBI MPC LIVE Updates: Much Needed Thrust Has Been Given on Digital Penetration

Shanti Lal Jain, MD & CEO of Indian Bank, said: “As expected, to curb the inflationary pressures, RBI has hiked the policy rates by 50 bps ensuring price stability. The series of measures including the reduction of excise duty on Petrol/Diesel announced by the Government are all likely to help in tempering the inflation trajectory. The revision of inflation projection for the current fiscal at 6.7 per cent, adding that RBI is committed to rein-in inflation while keeping growth in mind. More relaxation to Co-operative Banks will further help in bank credit growth and financial inclusions. Much thrust has been given on Digital penetration by enhancing the limit of e-mandate on cards, linking of UPI to Credit Cards (Rupay), and enhancing subsidy on PIDF (Payment Infrastructure Development Fund) scheme. There is a gradual recovery in the economy and hence the withdrawal of accommodation in a calibrated manner is supportive to the growth while containing the inflation.

Jun 08, 2022 15:33 IST

RBI MPC LIVE Updates: RBI Seemed Far More Concerned About Inflation

Abheek Barua, Chief Economist, HDFC Bank, said: “Today’s monetary policy announcement was aggressive and moves beyond just ‘frontloading’ of interest rates increases. The central bank seemed far more concerned about inflation – reflected in its upward revision in its inflation forecast by 100 bps to 6.7 per cent – and relatively more sanguine on domestic growth impulses. Clearly, the RBI is concerned about the broad-based nature of the increase in inflation and the risk of the second-round impact on inflation expectations. Therefore, the policy rate is likely to be raised well beyond the pre-pandemic level, close to 6 per cent, by fiscal year-end.”

Jun 08, 2022 14:51 IST

RBI MPC LIVE Updates: 50 bps Rate Hike in June Was Expected

Yash Gupta- Equity Research Analyst, Angel One Ltd, said: “As expected, the repo rate hiked by 50 bps to 4.90 per cent. After the commentary of the RBI governor last month, the market has already expected a rate hike of 50bps in the June meeting. So now the RBI has taken a decision on the rate hike of 50bps. We believe that this rate hike is already priced in the market. Along with this bank, rates have also increased by 50bps to 5.15 per cent and withdrawal of accommodative stance for the Indian economy.”

Jun 08, 2022 14:23 IST

RBI MPC LIVE Updates: Expect Another 50bps Repo Rate Hike by End of FY23

Sumit Shekhar, economist, Ambit Capital, said: “MPC’s focus has now turned to taming inflation as reflected by its hawkish stance and aggressive rate hike. We believe RBI is front-loading rate hikes (90bps in 2 months!). We expect another 50bps repo rate hike by the end of FY23 leading to an overall 140bps rate hike in FY23. Such a steep rise in borrowing costs will affect discretionary spending and dampen the nascent recovery of investments. We think that 10yr G-sec would cross 8% sooner than our earlier projection of – by end of CY22.”

Jun 08, 2022 13:44 IST

RBI MPC LIVE Updates: RBI is Playing Catch Up?

Vivek Iyer, Grant Thornton Bharat, said: “Supply chain side risks, which were expected to be transient in the past, turned out to be sticky due to the prolonged nature of the Ukraine Russia conflict and the zero covid policy of China, which has exacerbated the inflation situation and hence the need to take an aggressive stance to reign in the inflation. While there are some factions who believe that RBI is playing catch up, I believe that the timing is appropriate, given the evolving nature of certain variables in the external environment.”

Jun 08, 2022 13:23 IST

RBI MPC LIVE Updates: RBI Guv Shaktikanta Das On Cryptocurrency

“There is constant engagement between the government and the RBI on all issues related to cryptocurrency. Let’s wait for the government’s discussion paper,” said RBI Guv

Jun 08, 2022 12:53 IST

RBI MPC LIVE Updates: Think RBI Will Continue on Its Rate-Hiking Trajectory

Rahul Bajoria, Chief India Economist, Barclays, said: “Based on today’s moves, if the inflation outlook does not improve and downside growth risks do not rise materially, we think the RBI will continue on its rate-hiking trajectory, taking the policy rate to 5.25 per cent by delivering a 35 bps hike in the next meeting in August. The bank also indicated that inflationary pressures have become more entrenched, which has taken place much faster than it was expecting. Over the next three meetings (August, October, and December), we expect the RBI to make inflation management its key priority, which could include steps to curb aggregate demand. In terms of sequencing, we now expect the RBI to deliver a 35 bps rate hike in August, and then raise the policy rate by 25 bps to 5.50 per cent in October, while also switching to a neutral stance. Beyond that, we expect RBI to deliver one more rate hike in December to 5.75 per cent, which we now believe will mark the end of this cycle. This will allow the RBI to lean its policy stance towards tightening, while maintaining a neutral stance by the end of the calendar year.”

Jun 08, 2022 12:37 IST

RBI MPC LIVE Updates: 4% Inflation Target Remains Intact

RBI Governor Shaktikanta Das said that the RBI and MPC retain 4% inflation target (+/- 2%). Currently, inflation is well above the tolerance band.

Jun 08, 2022 12:29 IST

RBI MPC LIVE Updates: RBI Not Bound by Convention, Future Course Will Depend on Evolving Inflation-Growth Dynamics

Asked about the breach of the inflation target of 6 per cent, according to the RBI-government framework, Governor Shaktikanta Das said RBI will deal with the situation as and when the situation arises. He noted that these are extremely uncertain conditions, and hence extremely uncertain outlook. It is not possible to provide forward guidance, Das said.

Jun 08, 2022 12:19 IST

RBI MPC LIVE Updates: RBI Focusing on Withdrawal of Accommodation

RBI remains accommodative but is focusing on withdrawal of accommodation, said Das.

‘In terms of rates, RBI is still below the pre-pandemic level and in liquidity terms, we are above pre-pandemic level- this is what we mean when we say we remain accommodative,’ Das said.

Jun 08, 2022 12:13 IST

RBI MPC LIVE Updates: 75% of Inflation Projections Attributed to Food Inflation

RBI Governor Shaktikanta Das, said: “75 per cent increase in inflation projections attributed to food inflation.” RBI has raised FY 2023 inflation projections to 6.7 per cent.

Jun 08, 2022 11:36 IST

RBI MPC LIVE Updates: RBI Unanimously Re-Emphasised Its Endeavour to Contain Inflation

Amar Ambani, Head – Institutional Equities, YES Securities, said: “On the expected lines, RBI unanimously re-emphasized its endeavour to contain inflation through withdrawal of the accommodative stance and normalisation of the policy rates. 50bps hike in the repo rate was very much factored in the 10yr yields which moved above 7.5% before the policy outcome, only to retreat lower to 7.45%. Markets are taking respite from the fact that the central bank did not move on the CRR hike, as feared earlier.  On inflation, RBI now sees CPI average for FY23 to 6.7%, 100bps higher than the earlier estimate, with the revision primarily attributed to food prices. CPI inflation is likely to remain above the tolerance level of 6% till December 2022 and fall to 5.8% in Q4 FY23. RBI emphasized that the recent fiscal measures have moderated the inflation expectations. However, the inflation projection seemed to be a conservative one, as it assumes Oil to have peaked out and monsoon rainfall to be a normal one. So, the CPI projections are subject to revisions, depending on the magnitude of the supply-side risks. On growth, RBI retains GDP growth for FY23 at 7.2%, emphasising improving aggregate demand and capacity utilization in manufacturing. On the policy rate outlook, the pronounced priority to combat inflation has paved the path for further rate hikes, with the repo rate seen proximal to 5.75% by the end of FY23.”

Jun 08, 2022 11:12 IST

RBI MPC LIVE Updates: Another Rate Hike on Cards?

Naveen Kulkarni, Chief Investment Officer, Axis Securities, said: “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. May’22 witnessed pro-active measures by the central government in the form of excise duty cut on petrol and diesel, a ban on wheat export, and other similar measures easing domestic inflationary pressures. However, keeping in view the ongoing geopolitical tensions, rising crude oil prices, and global inflationary input cost pressures, the regulator has increased its inflation estimate for FY23 to 6.7% vs 5.7% earlier. RBI has retained its growth estimates at 7.2%. 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.”

Jun 08, 2022 11:07 IST

RBI MPC LIVE Updates: RBI May Hike Repo Rate by Another 35 bps in August

“We expect 35 bps repo rate hike in the August policy to 5.25 per cent and repo rate at 5.75 per cent by end-FY2023. Along with pushing the repo rate to above the pre-pandemic level, a 35 bps hike would also signal a gradual normalization in the policy actions while being adequately hawkish. We also expect another 50 bps hike in CRR to 5 per cent by end-FY2023 to move the liquidity conditions towards the pre-pandemic levels,” Suvodeep Rakshit, senior economist at Kotak Institutional Equities

Jun 08, 2022 11:01 IST

RBI MPC LIVE Updates: Advanced Economies Causing Volatility

“The faster pace of monetary policy normalisation undertaken by systemic advanced economies (AEs) is leading to heightened volatility in global financial markets. This is reflected in sharp corrections in major equity markets, sizeable swings in sovereign bond yields, US dollar appreciation, capital outflows from EMEs and even from some AEs,” said RBI Governor Das.

Jun 08, 2022 10:56 IST

RBI MPC LIVE Updates: Expect MPC to Hike Policy Repo Rate by an Additional 40 bps

Garima Kapoor, economist, Elara Capital, said: Amid steady improvement in domestic economic recovery and with an aim to rein in inflation, the MPC today hiked policy repo rate by 50 bps and hiked inflation projection by a massive 100 bps to 6.7 per cent. With inflation expected to remain above RBI’s mandate through FY23, we expect MPC to hike policy repo rate by an additional 40 bps this fiscal year and target a terminal repo rate of 6.25 per cent in the current hike cycle. A gradual tightening of domestic liquidity conditions, elevated crude oil prices, tightening of global financial conditions, and risks of overshooting of FY23 fiscal deficit is likely to put incremental pressure on the domestic bond yields. We expect 10-year bond yield to gradually move towards 8 per cent over next 4 to 6 months.

Jun 08, 2022 10:43 IST

RBI MPC LIVE Updates: RBI Raises Co-Operative Banks' Housing Loan Limits By 100%

RBI has raised housing loan limits for co-operative banks by 100 per cent.

Jun 08, 2022 10:38 IST

RBI MPC LIVE Updates: RBI Raises E-Mandate Limit to Rs 15,000

The RBI on Wednesday raised the e-mandate limit to Rs 15,000

Jun 08, 2022 10:34 IST

RBI MPC LIVE Updates: UPI Linking to RuPay Credit Cards

Linking of RuPay credit cards to UPI will now be allowed, said Das. RBI said that this will increase the convenience for users and enhance the scope of digital payments.

Jun 08, 2022 10:33 IST

RBI MPC LIVE Updates: RBI Guv on G-Sec Market

We are monitoring the G-Sec market very closely and will take measures, if required, the orderly government borrowing programme, says Das

Last month, RBI raised the repo rate or short-term lending rate by 40 basis points in an off-cycle monetary policy review to check spiraling inflation.

Almost all experts and economists had said the MPC will decide to raise the repo rate given the high inflation in the country. RBI Governor Shaktikanta Das has also said the expectation of a rate hike is a no-brainer. In an earlier interview, Das said that “We expect the RBI to hike repo rate by 40 bps in the June policy meeting. However, we should be open for a rate hike between 35-50 bps hinging on how the MPC wants to reach the pre-pandemic repo rate of 5.15 per cent or around that mark by the end of August policy. The RBI is likely to hike the CRR in one of the upcoming policies but will be contingent on how it sees the durable liquidity panning out over the next few months.”

In an off-cycle monetary policy review, the RBI’s MPC last month raised the repo rate by 40 basis points to rein in inflation. In the April policy review, the Committee had maintained the status quo on the key policy rate to keep it at four per cent.

Apart from this, experts also said the central bank is likely to raise the cash reserve ratio (CRR) in one of the upcoming policies but will be contingent on how it sees the durable liquidity panning out in the next few months.

Also Read: RBI Monetary Policy Meet: When Is It, How to Watch Shaktikanta Das Address LIVE; Details

The policy stance of the MPC will be the key to watch out for, as the future policy actions of the RBI will depend on this. In the off-cycle policy review last month, the MPC had retained its ‘accommodative’ monetary policy stance.

Rumki Majumdar, economist, Deloitte, said: “The forward guidance and communication about the monetary policy stance-despite raising the policy rates, the monetary policy stance has remained accommodative. Given the capital outflows that India has witnessed lately, managing liquidity conditions will be critical for healthy credit growth and business and consumer confidence.”

Another area of focus will be the Reserve Bank of India’s commentary on inflation. The retail inflation in April stood at an eight-year high of 7.79 per cent, forcing the RBI to hike interest rates in the off-cycle monetary policy last month.

In the April MPC meet, the RBI had revised upwards its retail inflation forecast to 5.7 per cent for the current financial year 2022-23, as compared with the 4.5 per cent projected earlier.

Asutosh Mishra, head Of research, institutional equity, Ashika Group, said: “Apart from rate action, we will keenly watch RBI’s Inflation forecast along with any changes in GDP growth estimates. It will be also interesting to know the future guidance of RBI on managing the growth inflation dynamics.”

Apart from these, other key announcements related to loans, cryptocurrencies, liquidity, etc, if any, will also be watched out for.

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