RBI Monetary Policy HIGHLIGHTS: Surprise, surprise! RBI keeps repo rate unchanged at 6.5%; spooks rupee, Sensex

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Updated: October 5, 2018 6:12:58 pm

RBI Monetary Policy October HIGHLIGHTS: The Reserve Bank of India today kept the repo rate unchanged at 6.5%, surprising the market, which had widely expected a rate hike of 25 basis points.

RBI Monetary Policy September 2018: The central held its fourth monetary policy meeting from October 3-5 (File Image: PTI)RBI Monetary Policy October 2018 HIGHLIGHTS: The central bank held its fourth monetary policy meeting from October 3-5 (File Image: PTI)

RBI Monetary Policy October 2018 HIGHLIGHTS: The Reserve Bank of India (RBI) today kept the repo rate unchanged at 6.5%, spooking the market, which had widely expected a rate hike of 25 basis points. While the RBI decided to maintain the status quo, it turned hawkish and ruled out any rate cut in future by changing stance from ‘Neutral’ to ‘Calibrated Tightening’.

The central bank held its fourth Monetary Policy Committee (MPC) meeting of FY19 against the backdrop of the sharp depreciation in the rupee, rising crude oil prices, intense pressure on current account deficit (CAD) and liquidity issues. Market watchers and top economists were expecting a 25 basis point hike once again after June and August.

Reacting to the RBI’s surprise decision, the rupee breached 74 vs dollar mark for the first time today, before paring some losses, while Sensex closed almost 800 points down. The central bank had hiked interest rate by 25 basis points each in June and August, citing upward pressure on inflation and volatility in crude oil prices.

Highlights

    17:40 (IST)05 Oct 2018
    Subtle warning from RBI to government: Stick to fiscal deficit target, or it will increase market volatility

    '...Should there be fiscal slippage at the centre and/or state levels, it will have a bearing on the inflation outlook, besides heightening market volatility and crowding out private sector investment,' the RBI said in its October policy statement.

    17:17 (IST)05 Oct 2018
    Tax cut on petrol, diesel made RBI comfortable before policy decision

    "The reduction of excise duty on crude oil by the central government yesterday and cut in taxes on petroleum products by select states also provided some comfort to RBI on the inflation front," Sujan Hajra, Chief Economist, Anand Rathi Financial Services Ltd told FE Online.

    17:05 (IST)05 Oct 2018
    Market doesn't appear appreciative of defying overcrowded consensus of rate hike: WGC Wealth

    "In a surprise move, RBI has left policy rates unchanged at 6.50% contrary to overall market consensus. However, there has been a shift in monetary policy stance to ‘Calibrated Tightening’ from an earlier ‘Neutral’ stance. Despite enumerating upside risks to inflation trajectory, the central bank seems to be drawing comfort from the recent positive surprises in CPI which led to status quo in policy rates. Further, RBI has revised CPI projections downwards for the H2 FY19 and Q1 FY20. Market appears to be not appreciative of defying the overcrowded consensus of a rate hike given the spurt in Oil prices, rising rates in developed markets and weaker currency."

    -- Rajesh Cheruvu, Chief investment officer, WGC Wealth

    16:40 (IST)05 Oct 2018
    Not targeting rupee, at 74 vs dollar, it is still better: RBI governor Urjit Patel

    On the day the rupee breached the 74-mark against the US dollar for the first time, RBI governor Urjit Patel Friday reiterated that the domestic currency is still better than its emerging market peers and that the apex bank does not have a target for it, news agency PTI reported. Read full story

    16:32 (IST)05 Oct 2018
    Bond market rejoice: 10-year bond yields fall sharply as RBI maintains status quo

    India benchmark 10-year government bond yields which had surged sharply this week due to the falling rupee and the anticipation that the RBI will hike the repo rate, fell sharply when it the central bank announced a status quo. India bond yields were down to 8.04% from 8.14%.

    16:21 (IST)05 Oct 2018
    RBI status quo surprise: From repo rate, stance, inflation to growth outlook - 9 key things to know

    Ruling out further rate cuts, RBI governor Urjit Patel today said that “calibrated tightening” means a rate cut is off the table. Here are 9 key things to know from today's MPC meet --  from repo rate, stance, inflation, to growth outlook. 

    16:10 (IST)05 Oct 2018
    DEA Secretary S C Garg reacts to RBI repo rate decision

    Welcoming the decision of RBI to keep rates unchanged, Economic Affairs Secretary S C Garg said the government's assessment of inflation is in line with the MPC's assessment. "We believe growth should turn out to be higher than that projected by MPC," Garg said.

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    16:06 (IST)05 Oct 2018
    Urjit Patel says it thrice: Our mandate is inflation targeting, amid rupee rout

    The Reserve Bank of India (RBI) took a surprising decision of not hiking the repo rate from 6.5%, which spooked the market. Defending the decision, governor Urjit Patel said it at least thrice in the post-policy press conference that the mandate of the central bank is to target inflation. He, however, said that rate cut is off the table. The market was expecting a 25 basis points hike.

    15:53 (IST)05 Oct 2018
    RBI keeps repo rate unchanged but your car, home loans may still go up

    All types of loans – including home, car and personal loans – may still cost more as a majority of banks and housing finance companies – including HDFC and SBI – have already increased their deposit rates apart from going in for a hike in their lending rates, anticipating a further hike in the policy rate. Read full story

    15:45 (IST)05 Oct 2018
    RBI Monetary Policy: 3 reasons why repo rates were kept unchaged

    Contrary to street expectations, the Reserve Bank of India’s monetary policy committee (MPC) kept the repo rate unchanged at 6.5% on Friday in its fourth bi-monthly monetary policy review for this fiscal year, while changing the stance from 'Neutral' to 'Calibrated Tightening'. Read All About RBI decision

    15:42 (IST)05 Oct 2018
    Quite an unexpected decision, experts react to RBI decision to hold repo rate

    It's quite an unexpected decision by the monetary policy committee to keep the repo rate unchanged at 6.5%. Having said that, the tightening of stance is obviously a well-thought-out decision. However, it indicates that more rate hikes are in the pipeline, says Mahesh Singhi, founder and MD, Singhi Advisors, Mumbai.

    15:38 (IST)05 Oct 2018
    RBI repo rate decision spooks market: Sensex closes nearly 800 points lower, Nifty down 3%

    As the RBI decided to keep repo rates unchanged at 6.5%, the Sensex closed Friday's trade nearly 800 points lower after diving almost 966 points intra-day. The NSE Nifty ended with over 3% losses.

    15:35 (IST)05 Oct 2018
    It will have an impact on economy, says economist Upasna Bhardwaj on RBI decision

    "A downside risk to growth forecast is building, although not a major one, as global trade and industrial activity are slowing down, and due to domestic liquidity tightening... it will have an impact on segments of the economy," Upasna Bhardwaj, economist, Kotak Mahindra Bank said.

    15:33 (IST)05 Oct 2018
    Cheer Up! Inflation is cooling down

    RBI said that the retail inflation, measured by on-year change in the CPI, fell from 4.9% in June to 3.7% in August, dragged down by a decline in food inflation.  It said that actual inflation outcomes, especially in August, were below projections.

    15:31 (IST)05 Oct 2018
    The REAL Reasons: What saved the day for loan borrowers

    Why did RBI go against the street expectations, leaving experts in 'disbelief'? The Reserve Bank of India’s monetary policy committee kept repo rate unchaged at 6.5% while turning hawkish in its stance. Has got something to do with cooling inflation? We take a look at key resons behind RBI's decision.

    Read full story here: Repo rate unchanged at 6.5%; what saved the day for loan borrowers

    15:29 (IST)05 Oct 2018
    RBI lowers CPI inflation forecast, keeps GDP growth forecast unchanged at 7.4%

    The Reserve Bank Friday lowered its retail inflation projection for the second half of the current fiscal to 3.9-4.5 per cent mainly because of an unusually benign trend in food prices. The RBI MPC has revised lower the CPI Inflation forecast for Q2FY19 to 4% from 4.6%; to 3.9-4.5% from 4.8% in H2FY19 and to 4.8% from 5% in Q1FY20.

    15:26 (IST)05 Oct 2018
    BREAKING View: 'Risky Move', says HDFC Bank chief economist Abheek Barua

    "This is a risky move by the RBI since the market was positioned for a rate hike, purely as a rupee defence. In its absence currency and asset markets could see sharper corrections. A narrow focus on inflation targets perhaps not desirable in the middle of a financial crisis," Abheek Barua, Chief Economist, HDFC Bank, said, adding, "Change in stance suggests that the rate hike could still come in the coming months."

    15:21 (IST)05 Oct 2018
    Experts react to RBI repo rate decision: I am in 'absolute disbelief', says Ajay Srivastava of Dimensions Consulting

    I am in absolute disbelief that what's happening at the regulatory front. With all due respect to the RBI but are they in the same world we are in? There is a bigger crisis at hand, the fixation on inflation targeting mandate is unbelievable, Ajay Srivastava of Dimensions Consulting told CNBC-TV18.

    15:13 (IST)05 Oct 2018
    Urjit Patel explains why RBI maintained status quo, says rate cut is off the table

    In a surprise move, the RBI today decided to keep the repo rate unchanged at 6.5%. Explaining the rationale behind the decision, governor Urjit Patel said that the mandate of the central bank is to target inflation at 4% (with 2% flexibility). He said that whatever risks are there have been included in the inflation forecast. "We had two rate hikes earlier. Today's stance is 'calibrated tightening', which means that in this cycle rate cut is off the table," he said.

    15:05 (IST)05 Oct 2018
    RBI Governor Urjit Patel says rupee has fallen 5% in real terms since March-end

    RBI Governor Urjit Patel today said that the rupee has fallen 5% in real terms since March-end. The RBI decided to keep the repo rate unchanged even as the market was expecting some intervention amid the rout in the currency market.

    15:01 (IST)05 Oct 2018
    Urjit Patel lauds quick decision in IL&FS crisis case, says market now stable

    RBI governor Urjit Patel today lauded quick decision making by the government to manage the crisis in IL&FS and said that it helped calm the market. The government took a Satyam-like step to supersede IL&FS board to fix problems at the company under top banker Uday Kotak. 

    14:57 (IST)05 Oct 2018
    RBI's priority is to strengthen macro-economic fundamentals: Inflation, Fiscal Deficit, Liquidity, Capital Flows

    RBI governor Urjit Patel today said that the priority of the RBI is to strengthen the macroeconomic fundamentals such as inflation, fiscal deficit, liquidity, capital flows etc.

    14:54 (IST)05 Oct 2018
    Forex Reserves at $405 billion enough to cover 10 months of import, says Urjit Patel

    RBI governor Urjit Patel today said that India's foreign exchange reserves at $405 billion are good enough cover 10 months of imports even as he expressed caution over other fundamentals.

    14:50 (IST)05 Oct 2018
    RBI votes 5-1 to keep repo rate unchanged at 6.5%; Ravindra Dholakia once again emerges as dove

    The MPC voted 5-1 to keep the repo rate unchanged. Chetan Ghate voted for an increase in the repo rate by 25 basis points, as was widely anticipated, while Ravindra Dholakia voted for maintaining 'Neutral' stance.

    14:44 (IST)05 Oct 2018
    Turbulence in currency market after RBI holds repo rate; rupee breaches 74-mark

    The Indian rupee hit the 74 vs dollar mark for the first time on Friday after the RBI kept repo rate on hold at 6.5%. The rupee dived to a low of 74.07 per US dollar immediately after the announcement.

    14:23 (IST)05 Oct 2018
    RBI to announce monetary policy decision shortly: Top economists bet on 25 bps repo rate hike today, one more expected later

    Over two-thirds of 61 economists said in a Reuters poll the RBI would lift the repo rate at least once by the end of 2018, with over half stating that there would be a 25 basis points rise in October, Bloomberg reported. 

    Also Read: RBI all set to raise interest rates next week for third time in row to support faltering rupee

    14:07 (IST)05 Oct 2018
    Replug: When RBI was not impressed with cheaper vegetables; here's classic noise vs signal debate

    In April, the MPC members maintained the status quo  — but minutes of the meeting showed that they did not rejoice the fact that vegetable prices in the country were cheaper. Reason: Vegetable prices are highly volatile, and largely a “noise” subjugating other more persistent components, or signals (food & fuel) of the headline inflation, which have, on the contrary, strengthened in February. Read full story

    13:57 (IST)05 Oct 2018
    RBI Monetary Policy Today Timing: When will Urjit Patel announce repo rate decision?

    The Monetary Policy Commitee (MPC), headed by RBI governor Urjit Patel, will release its bi-monthly monetary policy review statement today afternoon. Like every time, the policy decision will be announced at 2.30 PM, followed by a press conference and detailed policy statement. The RBI, then, releases minutes of the meeting after about two weeks. Read full story

    13:42 (IST)05 Oct 2018
    Fun Fact: Ravindra H Dholakia is dove, Michael Debabrata Patra is hawk of RBI MPC

    The repo rate decision is taken by the six-member Monetary Policy Committee, headed by RBI governor Urjit Patel. The MPC members are Dr Urjit R Patel, Chetan Ghate, Dr Pami Dua, Dr Michael Debabrata Patra, Dr Viral V Acharya, and Dr Ravindra H Dholakia. While Michael Debabrata Patra is known for his hawkish stance (for rate hikes), Ravindra H Dholakia often takes a dovish stance (against rate hike).

    13:18 (IST)05 Oct 2018
    RBI repo rate hike on cards? Sensex tumbles 500 points; below 35,000-mark ahead of policy outcome

    The BSE Sensex fell over 500 points on Friday, extending its losing run for the third day, ahead of the RBI's bi-monthly policy meet outcome amid weak global cues. The 30-share index after cracked the 35,000-mark by falling over 500 points. 

    Also Read: Sensex falls 500 pts ahead of RBI monetary policy

    13:04 (IST)05 Oct 2018
    Sharp rise in bond yields this week from 7.99% to 8.16% due to rupee fall, RBI repo rate hike expectation

    India benchmark 10-year government bond yields rose sharply this week due to the falling rupee and the anticipation that the RBI will hike repo rate by 25 basis points. The bond yields were at 8.16% on Friday, up from 7.99% on September 30. 

    Also Read: 3rd back-to-back RBI repo rate hike in making? Here's why October MPC decision is crucial

    13:04 (IST)05 Oct 2018
    Sharp rise in bond yields this week from 7.99% to 8.16% due to rupee fall, RBI repo rate hike expectation

    India benchmark 10-year government bond yields rose sharply this week due to the falling rupee and the anticipation that the RBI will hike repo rate by 25 basis points. The bond yields were at 8.16% on Friday, up from 7.99% on September 30. 

    Also Read: 3rd back-to-back RBI repo rate hike in making? Here's why October MPC decision is crucial

    12:45 (IST)05 Oct 2018
    Surprising fact! CAD deteriorated even as inflation remained within 4% range

    Surprisingly, CAD has deteriorated towards 2.5% when inflation was within 4% range in the last 4 years, says Kunal Shah, Fund Manager, Debt at Kotak Mahindra Life Insurance Limited. 'The need for a hike in interest rate will purely be basis weaker external environment and to keep real rates high to support currency and capital flows,' he added. Read full story

    12:28 (IST)05 Oct 2018
    RBI repo rate hike will hurt rupee, says BoFML's Indranil Sen Gupta ahead of policy decision

    While the street is expecting a repo rate hike of 25 basis points amid market turbulence, top economist Indranil Sen Gupta has said that a rate will end up hurting rupee than helping it. "High rates actually end up hurting INR as FPI equity investments, which tend to chase growth, are 8x that of debt investments. It is RBI OMO, rather than rate hikes, that will drive yields/lending rates," Indranil Sen Gupta, Chief India Economist, Bank of America Merill Lynch, wrote in Financial Express. Read full story

    12:08 (IST)05 Oct 2018
    Crude oil prices may be a big worry for RBI; Brent surged to $84.98 per barrel today

    The RBI has shown worry over volatility in crude oil prices in last few MPC meetings. Ahead of the policy decision, international benchmark Brent crude oil futures were at $84.98 per barrel, up 0.5% from their last close. US West Texas Intermediate (WTI) crude futures were up 0.6% at $74.80 a barrel. Also Read: RBI monetary policy meet begins today: From rupee to fuel prices, top 5 issues MPC should take up

    11:47 (IST)05 Oct 2018
    Massive cut in petrol, diesel prices ahead of RBI policy decision; will tax cut rein in inflation?

    The central government and 11 state governments have announced a massive relief of up to Rs 5 a litre on petrol and diesel effective Friday, just a few hours ahead of the crucial policy decision scheduled later in the day. The tax cuts on fuel may help in reining in inflation to some extent, say experts.

    Also Read: Big decision by Modi government on fuel prices; announces Rs 2.5 per litre relief on petrol, diesel

    11:19 (IST)05 Oct 2018
    Equity investors raising cash in portfolios ahead of RBI policy decision, expecting 25 basis point hike in repo rate

    Equity investors have been increasing the amount of cash they’re holding ahead of the RBI’s repo rate decision today. That’s because they’re expecting an increase in borrowing costs and want to have plenty of money to deploy when it’s time to invest again, Bloomberg reported. Read full story

    10:55 (IST)05 Oct 2018
    US Fed hiked rate by 25 basis points to 2.25%: Is it likely to impact RBI's decision too?

    The rising US rates and its outlook for more rate hikes in future are also likely to be a pointer for the MPC. The stage is set for another rate hike, says Lakshmi Iyer of Kotak Mahindra Asset Management Company. The US Fed hiked rate by 25 basis points to 2.25%.

    10:24 (IST)05 Oct 2018
    Market opens in red ahead of crucial RBI policy review meeting; Sensex falls over 350 points, Nifty down by 150 points

    Ahead of crucial policy review meeting of the RBI, the market opened in the red on Friday. The S&P BSE Sensex fell over 350 points in early trade, while 50-share Nifty lost 150  points.

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