RBI MPC Highlights: RBI keeps policy rates unchanged; raises inflation forecast,


The Reserve Bank of India veered further away from the central banks of the Western world as it retained status quo on interest rates and kept the monetary stance accommodative to beat a possible slowdown in economic activity due to geopolitical tensions while promising to keep a tab on inflation.

The reverse repo rate, the rate at which the RBI borrows money from the banks in the short term, has been unchanged at 3.3%.The repo rate or the short-term lending rate was last cut on May 22, 2020. Since then, the rate remains at a historic low of 4 per cent.

The Monetary Policy Committee raised the inflation forecast for the fiscal year to 5.7% percent, from 5.5 percent citing rising commodity prices. Economic growth forecast has been cut to 7.2 percent, from 7.8 percent as supply disruptions lessen output and high prices destroy demand.

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Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, on RBI MPC decisions

Retaining the Repo rate at 4 percent and continuing with the accommodative stance was on expected lines. Raising the Reverse repo to 3.75 percent has pushed up the 10-year yield above 7 percent.

The Governor rightly emphasized India’s macro strengths pointing to the improvement in the external situation helped by the record exports, ample forex reserves of $608 billion and strengthening of the financial sector. A new tool introduced by the central bank is the SDF ( Standing Deposit Facility) to absorb liquidity. SDF will be the floor of the LAF corridor.

RBI’s measures are supportive of growth: Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers

“With today’s measures RBI has moved to the path of gradual increase of policy interest rate and phased withdrawal of liquidity. From a medium term perspective, the measures are supportive of growth, price stability and orderly development in the financial markets,” he said.

RBI panel to review, improve customer service

RBI Governor Shaktikanta Das said a committee was proposed to set up to examine and review the current state of customer service in the RBI Regulated Entities (RE), adequacy of customer service regulations and suggest measure to improve the same.

This policy strengthens our view that the first repo rate hike will be in the August policy. We expect the stance to be changed to “neutral” from “accommodative” in the June policy.

– Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities,

RBI decision reflects the need to balance growth: Vivek Iyer, Partner and leader , Financial services risk, Grant Thornton Bharat

“The RBI policy on keeping the repo rate unchanged reflects the need to balance growth vis – a – vis inflation. Having said this, the RBI does not downplay the inflation risks and understands that the monetary policy will be less accommodative. It would however, be worthwhile to note that this is a very courageous call by the RBI, especially when everyone around the world is increasing interest rates,” Iyer said.

RBI on rupee-rouble trade

RBI Governor Shaktikanta Das, in a press conference after announcing the policy rates, said that the central bank will not do anything that goes against economic sanctions on Russia.

HDFC-HDFC Bank merger proposal currently under consideration: RBI’s Das

Wanted to withdraw ultra-accommodative stance but remain accommodative

– Dy Guv Michael Patra

The policy left key rates unchanged, however has introduced SDF ( standing deposit facility ) at 3.75% this effectively means the overnight rates will Have a floor of 3.75% ( rise by 40bps) This policy, in some sense, is a Segway to tightening policy rates in the coming months.

– Lakshmi Iyer, Chief Investment Officer (Debt) & Head Products, Kotak Mahindra Asset Management Company

Hawkish or dovish, I will not like to enter into that

– RBI Governor Shaktikanta Das

RBI Guv says the central bank is not behind the curve.

“We have stopped G-sec last year while advanced economies still reducing bond purchases…Outright OMOs have also stopped. We have been watchful on rates but war was something that started on 24 Feb and it has introduced a new element in the scheme of things.”

There are 7 things from a monetary policy point of view that we’ve done. We have upwards revised inflation & growth projections, due to war-induced factors; primary reasons being prices of crude oil going up to $100/barrel, price of wheat, edible oil: RBI Governor Shaktikanta Das

There is no proposal to allow non-banks to use SDF to park funds with RBI as of now: Reserve Bank of India

We don’t want to freeze our options: Das

System is dynamic and our actions will be tailored accordingly: RBI Governor Shaktikanta Das

SDF has been introduced and now it is the bottom of the…

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