RBI MPC Meet 2023 Highlights: The Reserve Bank of India hiked its key repo rate by 25 basis points on Wednesday as expected but surprised markets by leaving the door open to more tightening, saying core inflation remained high. The central bank said that its policy stance remains focused on the withdrawal of accommodation. Most analysts had expected a hike on Wednesday to be the final increase in the RBI’s current tightening cycle, which has seen it raise rates by 250 bps since May last year.
“The MPC is likely to raise policy rates by 25 bp today. This is known to the market and is unlikely to have any meaningful impact on the market. The important trends impacting markets globally are the developments in the US economy and rate action by the Fed.”
– V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services
“Given, how well the RBI has controlled inflation in recent months, we anticipate that it will soon align with the government's preference for growth. This week a status quo is expected or at the best, one last hike and then rate hikes could be paused. We anticipate a halt in interest rate hikes in the subsequent next months, followed by the reversal in rates starting next year.”
– Umesh Kumar Mehta, CIO, SAMCO MF
“The RBI may mildly revise down its inflation forecast for FY24, even as it would re-emphasize the near-term stickiness of core inflation. We see FY24 average headline/core inflation at 5.2%/5.0%.”
– Madhavi Arora, Lead – Economist, Emkay Global Financial Services
“While the MPC’s decision is finely balanced between a pause and a 25 bps hike, we expect the MPC to hike by a last 25 bps to push the real repo rate comfortably into positive. This would help the RBI to be on a prolonged pause as it assesses the lagged impact of the past rate hikes and input price movements, evolution of the global and domestic demand conditions, and behaviour of global central banks.”
– Suvodeep Rakshit Senior Economist, Kotak Institutional Equities
“The RBI MPC will view the recent inflation prints favourably. 3QFY23 CPI inflation at 6.1% is around 50 bps lower than RBI’s estimate and 4QFY23 inflation is also likely to be 20-30 bps lower than RBI’s estimate. We estimate inflation to average around 5.2% over the next 12-15 months. The real repo rate would be positive by around 100 bps at the current level.”
– Suvodeep Rakshit Senior Economist, Kotak Institutional Equities
“The MPC is likely to maintain its stance of “withdrawal of accommodation” and ease the pace of rate increases by RBI hiking rates by 25bps in Feb. Housing credit growth has been leading retail credit growth, rising by over 15%. As the market sentiment in the real estate sector in non-metro markets remains strong, demand is likely to offset the rate increase impact.”
– Ravi Subramanian, MD & CEO, Shriram Housing Finance
“With inflation coming under control and reduced pace of US Fed rate hike, the focus of the RBI is now likely to shift towards maintaining growth, which can moderate in the coming financial year owing to global uncertainties. Thus, moderation in the pace of repo rate hike is pertinent to keep domestic demand afloat to support the economy.”
– Vivek Rathi, Director Research, Knight Frank India