RBI Monetary Policy meeting LIVE updates: The Reserve Bank of India Monetary Policy Committee hiked repo rate by 50 bps taking it to pre COVID pandemic levels. The repo rate now stands to 5.40 per cent, highest level since August 2019. This is the third consecutive hike in the repo rate in the last three months. RBI Guv Shaktikanta Das said that consumer price inflation has eased, but remains higher than comfort levels. The real GDP growth projection has also been retained at 7.2 per cent for 2022-23. Moreover, RBI policy stance has been retained at ‘Withdrawal of Accommodation’. “Volatility in global financial markets is impinging upon domestic financial markets leading to imported inflation,” Das added.
RBI Monetary Policy August 2022 Live Announcements: RBI MPC likely to hike repo rate by 35-50 bps; may withdraw accommodative stance
RBI MPC will remain focused on calibrated withdrawal of accommodation to deal with inflation while still focusing on growth, said Shaktikanta Das. He added that policy stance is retained at 'Withdrawal of Accommodation'.
Globalisation of inflation coinciding with de-globalisation of trade, he said. Indian economy naturally impacted by the global economic situation, said RBI Governor Das.
RBI Monetary Policy Committee (MPC) adjusts Standing Deposit Facility (SDF) to 5.15%. MSF rate and bank rate at 5.65%. Indian economy naturally impacted by the global economic situation, said RBI Governor Shaktikanta Das.
RBI Monetary Policy Committee has hiked repo rate by 50 bps to 5.4%, third hike in a row. Repo rate is now back to pre-pandemic levels, highest since August 2019. The repo rate is the rate at which the central bank of a country lends money to commercial banks.
IMF has lowered global growth, flagged recession fears. COVID pandemic, war to pose long-term challenges to growth, says Shaktikanta Das
RBI Governor Shaktikanta Das begins RBI MPC August 2022 meeting
The Bank Nifty index witnessed high volatility a day before the RBI Policy with movements on both sides. The RBI has raised rates twice since May and is expected to hike rates again to tame persistently high inflation in Asia's third-largest economy. Mohit Nigam, Head – PMS, Hem Securities
The MPC in its August policy announcement is likely to hike rates upward of 35bps, however, I don’t anticipate a jumbo-sized hike like other major central banks namely US Fed or ECB. This is because in the absence of any fresh shocks, economic conditions in India have marginally improved and therefore an aggressive rate path is not warranted. In fact, any supersized hike in repo rate will go against the palpable recovery in productive sectors like housing and construction which have the highest forward and backward linkages in the economy. Ravi Subramanian, MD & CEO, Shriram Housing Finance
While there has been some indications of the inflation moderating, with the Brent still above the $100 mark and a falling Rupee, we can expect the RBI to hike the Repo Rate by about 50 bps. However, what has to be noted is their tone which has mellowed down over the past couple of weeks where they don't want to compromise on growth to fight inflation. They would rather have the fiscal policies address the pressure on the prices than act to reduce liquidity in the system to suppress demand. Sumit Chanda, Founder and CEO, JARVIS Invest
A drop in crude oil prices amidst fear of recession has recently aided positive market sentiment. With equity markets recently seeing an upturn and amidst half of corporate India declaring the earnings, a slew of economic data like Auto sales and commentary from RBI monetary policy would be keenly watched out for by market participants. With the onset of RBI monetary policy meeting decision due today the expectations are set towards changes in Repo Rate in a bid to manage overall rising inflationary expectations. Sumit Chanda, Founder and CEO, JARVIS Invest
The key debate for the RBI MPC in the August policy will be on the quantum of rate hike and what signal will accompany it. While a 25 bps hike is ruled out, market opinions are split between a 35 bps hike and a 50 bps hike. We believe that a 50 bps hike will be appropriate in this policy to acknowledge (i) elevated but gradually falling inflation, (ii) being in sync with global monetary policy while reacting to domestic macro situation, (iii) addressing external sector pressures by managing interest rate differentials, and (iv) continuing to frontload the rate hikes. Arguably, the quantum of hike is finely balanced within the 35-50 bps range, said Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities.
RBI is likely to continue the tightening after today’s hike as well. The repo rate is expected to be at 5.75 per cent at the end of this fiscal. Headline inflation will continue to breach the 6 per cent threshold for many more months, and is likely to cool-off after spiking in September on a low base. The average CPI for FY23 will be 6.7 per cent and it will come below the 6 per cent mark only in March. There is likely to be significant fiscal slippage and the fiscal deficit will come at over 9.7 per cent for FY23. The ongoing depreciation in the currency is having an impact on inflation given the import reliance, and also added that off-late, there has been some softening of the commodity prices, according to Saugata Bhattacharya, Chief Economist, Axis Bank.
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Interest rate hikes could be frontloaded in the current cycle. “While some of the early signs of inflation moderation are visible, we believe that the external sector risks remain and to offset, at the margin, the increasing pressure on rupee, RBI should frontload the rate hikes even as the overall terminal rate may not eventually be very high,” said Upasna Bhardwaj, chief economist, Kotak Mahindra Bank. Bhardwaj expects the repo to rise to 5.75% by end-2022 from 4.9% at present.
RBI would ideally prefer to retain flexibility in its actions rather than strait-jacket itself into a predetermined policy path. The RBI’s objective of front-loading the rate hikes should be served well through a 50 bps repo rate hike to 5.25% while shifting to a data-dependent policy action from here on. This should help in retaining the hawkish stance while acknowledging some incipient softening in inflation trajectory.
~Suvodeep Rakshit is Senior Economist in Kotak Institutional Equities
RBI’s deliberations will likely be centered around (1) global monetary policy cycle and outlook for global growth, (2) external sector imbalances manifesting in pressures on the INR, (3) recent easing of global commodity prices, and (4) domestic inflation and growth trajectory. The RBI will also note that since the June policy, the Fed has surprised on the upside with hikes of 150 bps over the June and July policies. We believe that while domestic inflation concerns may be slightly lower, external sector concerns warrant caution.
The Reserve Bank’s rate setting panel will hike the key repo rate by 0.35-0.50 per cent at today's review meeting. A hike of such a quantum will take the repo rate beyond the 5.15 per cent level, at which the RBI had begun the ultra-accommodative measures in the face of the COVID-19 pandemic. MPC will go into the internal surveys like household inflation expectations and consumer confidence while deciding the quantum of the rate hike. The rate hike will be both an attempt to stem inflation expectations, and also one part of it will be a frontloading of actions.
~Saugata Bhattacharya, Chief Economist, Axis Bank
MPC to step back from its commitment to withdrawal of accommodation as there is little liquidity right now. “They will indicate the use of OMO (open market operations) to provide liquidity,” said Madan Sabnavis, chief economist, Bank of Baroda (BoB). Sabnavis expects a 25-bps hike in the repo rate.
Days after the US Fed raised the interest rate, the RBI may go in for its third consecutive policy rate hike by 25-35 basis points to check high retail inflation, experts said. The central bank has already announced to gradually withdraw its accommodative monetary policy stance. The Monetary Policy Committee meeting began on August 3 to deliberate on the prevailing economic situation and will announce its bi-monthly review on Friday. With retail inflation ruling above 6 per cent for six months, the RBI had raised the short-term borrowing rate (repo) twice — by 40 basis points in May and 50 basis points in June. The existing repo rate of 4.9 per cent is still below the pre-Covid level of 5.15 per cent. Experts are of the view that the Reserve Bank of India (RBI) would raise the benchmark rate to at least the pre-pandemic level this week and even further in later months.
Most economists expect the Reserve Bank of India (RBI) to raise the repo rate by 35-50 basis points (bps) in its policy meeting this week. The monetary policy committee (MPC) is scheduled to meet from August 3-5. With consumer price inflation (CPI) falling to 7.01% in June, analysts expect the MPC to lower its inflation forecast of 6.7% for FY23. Earlier this month, RBI governor Shaktikanta Das said that inflation appears to have peaked, while cautioning that commodity prices remain high despite the softening trend observed in June.
The Reserve Bank will deliver two more rate increases with the first of 25-30 bps later this week, and then pause for data-prints on domestic inflation and the US economy, says foreign brokerage UBS Securities. RBI's rate-setting panel MPC will announce the second bimonthly policy review today and the market has already priced-in a third rate hike given the run-away inflation, which is has already been hovering over 7 per cent for the past many months.
Recent easing in commodity prices declines and relief commentary from Fed chair on the quantum of rate hike would provide some respite to policy makers. We expect both the growth and inflation forecasts to remain unchanged in this policy announcement. On the basis of expected normalisation of negative real rates and potential currency weakening, RBI will need to continue raising rates. We expect the RBI to increase the policy rate by 50bps in Aug meeting. To offset this hawkish move, it may tone down expectations of further rate hikes given the backdrop of falling inflation and relatively benign commentary by global central banks, though it will continue to watch data coming out from time to time.
We anticipate the upwards revision to be in the range of 35 – 40 BPS, taking the total change since May 2022 to 125 – 130 BPS higher. From the real estate sector’s standpoint, an upward revision will impact the sentiments of home buyers, who have remained positive despite the last set of revisions that led to a rise in home loan interest rates. A further increase in repo rates will lead to a proportionate erosion of affordability, thereby possibly impacting sales momentum.
~Shishir Baijal, Chairman and Managing Director, Knight Frank India
The MPC is likely to unanimously vote for a 35bps or so hike in the policy rate this week, with limited change in the broad outlook of domestic macro realities. With recession fears gathering globally, the reaction function of central banks, including the Reserve Bank of India (RBI), will likely start weighing the growth-inflation trade-off carefully in the coming months. INR pressures are unlikely to dictate MPC’s decision as of now. Even as India’s inflation has peaked, it still warrants caution, especially underlying inflation appears sticky. Nonetheless, with end-March FY23 inflation likely under 5.0% and sliding down further ahead, FY23 could see policy rates go up by another 75bps (including August), with the RBI showing its intent to keep real rates near the estimated natural rate.
Recent commodity price declines could offer the RBI some room to lower its inflation forecasts modestly amid signs of stable growth. Still, we expect the RBI to deliver a unanimous 35bp repo rate hike during this week’s policy review meeting, followed by two 25bp rate increases – one in September and another in December. We expect monetary normalisation to continue, but see signs that the RBI is turning more comfortable with a modest pace of rate hikes.
~Rahul Bajoria, MD & Chief India Economist, Barclays
We expect RBI MPC to hike benchmark repo rate by 50bps as CPI continues to rule above RBIs threshold band. Commentary may be neutral / dovish as CPI trend seems to be following RBIs forecast for FY 2023. Key to watch also would be the guidance if any in the future course of rate moves.
~Lakshmi Iyer, Chief Investment Officer (Debt) & Head Products, Kotak Mahindra AMC
We now expect the RBI MPC to raise policy repo rate by 35bp on Aug 5 & change stance to calibrated tightening. We see RBI MPC retain growth and inflation forecasts at 7.2% & 6.7% yoy respectively in this case & see repo at 5.75% by Mar’23. The possibility of an aggressive 50bp & a measured 25bp hike cannot be ruled out either. In our base case, we now see the RBI MPC hike policy repo rate by 35bp, taking it to 5.25%, with stance change to calibrated tightening from withdrawal of accommodation. We expect the RBI MPC to retain their CPI and real GDP growth forecasts.
~ BofA Global Research
With the softening of many commodity prices, CPI inflation seems to have broadly peaked at the current levels and expected to witness a downward movement to below 6% by Q4FY23. However, domestic inflation is still high and so is the global commodity prices, we expect RBI to continue with front-loading of rate hiking cycle. We expect 50 bps of repo rate hike in the upcoming policy and another 50-bps rate hike post that taking the terminal repo rate to 5.90% by the end of the fiscal year.
~ Rajani Sinha, Chief Economist, CareEdge
India’s central bank is expected to deliver another half-point increase in its main policy rate on Friday to signal it’s not letting up in its fight against inflation while fending off further attacks on the rupee. Thirteen of 27 economists surveyed by Bloomberg as of Wednesday see the Reserve Bank of India’s six-member monetary policy committee increasing the repurchase rate by 50 basis points to 5.40%, a level last seen in August 2019. One predicted a 40 basis-point move, nine expect 35 basis points, and the remaining a quarter-point hike, which is enough to return borrowing costs to pre-pandemic levels of early 2020.
RBI MPC on Friday could continue with frontloading of rate hikes to at least above its pre-covid level of 5.15% to keep a check on inflation. Repo rate may be hiked by 35-50 bps. To offset this hawkish move, MPC may tone down expectations of further rate hikes given the backdrop of falling inflation and relatively benign commentary by global central banks, though it will continue to watch data coming out from time to time.