RBI Governor Highlights: Reserve Bank of India governor Shaktikanta Das today said that the Monetary Policy Committee (MPC) met in an off-cycle meet and voted unanimously to hike the policy repo rate by 40 basis points, taking it to 4.40%. He added that global inflation is expected to remain high in April and RBI’s policy actions are an attempt to curb inflation and maintain growth. He added that MPC decided to hike the Cash Reserve Ratio (CRR) by 50 basis points to 4.5%. CPI inflation climbed to 6.95 per cent in March while WPI (wholesale price index) inflation touched 14.55 per cent in the same month. Economists and market experts have pointed out that the central bank needs to hike rates by 50 basis points in the upcoming June monetary policy meeting. Shaktikanta Das’ decision comes just ahead of the US Federal Reserve policy meeting, where the Jerome Powell-led FOMC is expected to initiate the rate hike cycle.
“The governor today clearly laid out the rationale for hiking policy rates with this inter-meeting move, saying the RBI is not adhering to any defined playbook, and the move was a response to heightened uncertainty in the global macro backdrop. The 40bp rate hike today was not a shift in policy accommodation, the governor said; the stance and policy conditions remain accommodative. The rate increase merely reversed the 40bp repo cut delivered in May 2020,” said Rahul Bajoria, MD & Chief India Economist, Barclays
“RBI hikes rates by 40 basis point increase the SDF rate to 4.15% and Repo rate to 4.40%. It also hiked the CRR by 50 basis point which will immediately take of Rs. 87000 crores as liquidity and about 2.00 lac crore due to multiplier effect in the next 5- 6 months. USDINR gained immediately upto 76.21 due to this rate hike while equity markets fell after the announcement by RBI. The dollar index still on the higher side at 103.43 and with today's FED meet should remain higher. So we do not expect rupee to appreciate much due to this rate hike and expect it to remain in a range of 76-76.70 in the next 1 month. Have to watch what FED says tonight,” said Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors
“The MPC's decision, in an unscheduled meeting, to raise the repo rate by 40bp and CRR by 50 bp is a surprise since it came on the LIC IPO opening date. MPC's proactive move is justified from the perspective of inflation management, but the timing leaves a lot to be desired. The above 1000 point crash in Sensex has soured the sentiments on the opening day of India's largest IPO. The 10-year bond yield has spiked to above 7.39% indicating an imminent rise in the cost of funds,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
After having hiked rates in an off-cycle meeting this week, the MPC members will meet again between June 6-8.
By the end of the year, we could be back at 5.15% policy rate, said Upasna Bhardwaj, Economist, Kotak Mahindra Bank in an interview with CNBCTV18.
RBI Governor said that sustained high inflation inevitably hurts savings, investment, competitiveness and output growth. “I would, therefore, like to emphasise that our monetary policy actions today – aimed at lowering inflation and anchoring inflation expectations – will strengthen and consolidate the medium-term growth prospects of the economy,” he added.
RBI Governor Shaktikanta Das recalled that MPC reduced policy rates by 75 basis points on March 27, 2020 followed by another reduction of 40 basis points on May 22, 2020. “Accordingly, the decision of the MPC today to raise the policy repo rate by 40 bps to 4.40 per cent may be seen as a reversal of the rate action of May 22, 2020 in keeping with the announced stance of withdrawal of accommodation set out in April 2022,” he added.
The sharp acceleration in headline CPI inflation in March 2022 to 7 per cent was propelled, in particular, by food inflation due to the impact of adverse spillovers from unprecedented high global food prices. Nine out of the twelve food sub-groups registered an increase in inflation in March. High frequency price indicators for April indicate the persistence of food price pressures. Simultaneously, the direct impact of the increases in domestic pump prices of petroleum products – beginning the second fortnight of March – is feeding into core inflation prints and is expected to have intensified in April,” RBI Governor Shaktikanta Das said.
RBI Governor Das said that the normalisation of monetary policy in major advanced economies is now expected to gain pace significantly — both in terms of rate increases and unwinding of quantitative easing as well as rollout of quantitative tightening. “These developments would have ominous implications for emerging economies, including India,” he said.
The standing deposit facility (SDF) rate stands adjusted to 4.15 per cent; and the marginal standing facility (MSF) rate and the Bank Rate to 4.65 per cent
CRR hike may result in withdrawal of liquidity worth Rs 87,000 crore. CRR hiked by 50 basis points.
RBI Governor Das said that CRR will be hiked by 50 basis points to 4.5% from May 21.
Inflation must be tamed to keep the Indian economy resolute, said RBI Governor Shaktikanta Das. He added that efforts to maintain price stability would help financial and macroeconomic stability.
Policy decisions of today are aimed at re-anchoring inflation expectation and will eventually result in the strengthening of growth prospects, said RBI Governor Shaktikanta Das. He added that MPC decision growth is positive.
RBI decided to increase cash reserve ratio (CRR) by 50 bps to 4.5%, said RBI Governor Shaktikanta Das.
Headroom of re-anchoring of inflation has become possible with the pullback in pandemic scale, said RBI Governor Shaktikanta Das. He added that liquidity needs to be modulated in line with policy actions.
Today's rate action may be seen as a reversal of the rate action announced in May 2020, said RBI Governor Shaktikanta Das.
Risks of input cost pressure, are promoting another round of rise in prices said RBI Governor Shaktikanta Das. he highlighted that rise in prices would weigh on inflation.
Petrol prices feeding into inflation print said RBI Governor Shaktikanta Das. He added that the same is expected to have been accentuated in April.
Private consumption is regaining traction, said RBI Governor. He added that agricultural prospects are better with a forecast of normal monsoon.
To remain accommodative but focus on withdrawal of accommodative stance RBI Governor Shaktikanta Das said.
SDF now stands at 4.15% said RBI Governor Shaktikanta Das.
Normalisation in major advanced economies is expected to gain pace significantly, said RBI Governor Shaktikanta Das. He added that this would be in terms of rate increase and QE and tightening.
Edible oil shortage owing to Europe conflict and ban by exporter, said RBI Governor Shaktikanta Das.
RBI Governor Shaktikanta Das said that geopolitical tensions are forcing inflation higher in major economies. He added that crude oil price is volatile and above $100 per barrel.
RBI Governor Shaktikanta Das said that the MPC has unanimously decided to hike interest rate by 40 bps to 4.40%
RBI Governor Shaktikanta Das said that RBI MPC met off-cycle to assess the global growth.
RBI Governor Shaktikanta Das quotes IMF, which says the effect of the Russia-Ukraine war spreading throughout the globe.
RBI Governor Shaktikanta Das says RBI and MPC helping the Indian economy to navigate through the current geopolitical crisis. He highlighted that global growth seems to be losing pace.
By remaining accommodative monetary policy is supporting growth, said RBI Governor Shaktikanta Das. He added that the Indian economy has managed to steer through the storm so far.
RBI Governor Shaktikanta Das has started his unscheduled addrress.
Sensex and Nifty were sitting deep in the red with losses just ahead of RBI Governor Shaktikanta Das' statement.
RBI Governor Shaktikanta Das will make a statement soon. The statement comes just ahead of the US Fed meet later today.
The share of incremental bank credit in incremental nominal GDP is likely to cross the 50 per cent mark in the current financial year, from a decade low of 27 per cent in FY2022, an SBI research report said on Monday.
While the risks to domestic growth call for continued accommodative monetary policy, inflationary pressures necessitate monetary policy action. The circumstances warrant prioritising inflation and anchoring of inflation expectations in the sequence of objectives to safeguard macroeconomic and financial stability, while being mindful of the ongoing growth recovery,” RBI Governor Das said in the last MPC meet.
The MPC turned markedly hawkish in its April policy statement, stating that it would remain accommodative with a focus on the withdrawal of accommodation. Hiking the inflation projection for FY23 to 5.7% from 4.5% and cutting the same for growth to 7.2% from 7.8%, Reserve Bank of India (RBI) governor Shaktikanta Das made it clear that inflation is now a bigger priority than growth.
Ahead of RBI Governor Shaktikanta Das' address, domestic headline indices were down in the red. Market analysts to expect a rate hike in the next policy meeting.
According to latest inflation readings, the Wholesale Price Index (WPI) inflation touched 14.55 per cent 14.55% in March, a four-month high, while the Consumer Price Index (CPI) inflation spiked to 6.95 per cent in March to a 17-month high.
The central board of the Reserve Bank of India (RBI) on Monday approved the appointment of executive director Rajiv Ranjan as an ex-officio member of the Monetary Policy Committee (MPC). Ranjan will be succeeding Mridul Saggar, who is understood to have retired.
As the war in Ukraine continues to vex the global supply chain and inflate prices of goods and commodities, the Indian economy is not expected to remain immune from the negative global conditions, the Reserve Bank of India said in a report last month. India is facing high inflation, widening trade deficit and foreign portfolio investment outflow, the central bank added. These conditions are expected to hamper growth and lead to ‘rocketing inflation’.
Farm exports were driven by a 273% surge in wheat exports to $2.1 billion, 27% rise in non-basmati shipments to $6.1 billion, showed the commerce ministry data. The chemicals segment recorded a 17% rise on higher shipments of agro, inorganic and organic chemicals, although bulk drugs and formulations exports barely grew, partly due to export curbs on select items.
India’s trade deficit widened in the first month of fiscal year 2023 to $20.07 billion, an increase of over 30 per cent from last year. India reported an increase in both exports and imports of goods in April in comparison to last year, however, the merchandise exports and imports fell month-on-month. Experts see the ongoing Russia-Ukraine war and US Federal Reserve’s monetary policy tightening measures to continue to put pressure on India’s current account and on rupee’s value. Barclays says it expects the trade deficit to widen to $250 bln in FY 2023, which would be the largest goods trade deficit on record. Kotak Institutional Equities expect the rupee to remain under pressure this year.
The Reserve Bank of India Governor's statement comes ahead of expected US Federal Reserve rate hike cycle. The market is expecting US Fed to hike interest rates by 50 basis points on Wednesday when chair Jerome Powell announces the policy statement. Investors and market participants also expect the Fed to announce its plans to reduce the size of its $8.9 trillion balance sheet.
