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RBI's monetary policy meet: Here's some of the expectations
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IANS | 06 Jun, 2022
Though the RBI's raising policy rates in the ongoing monetary policy
committee meeting is a "no-brainer", as its Governor Shaktikanta Das
said in a recent interview, investors, however, await the actual degree
of percentage hike before taking fresh positions and future course of
action in the financial markets.
Besides policy rates, investors also eye other macro-economic forward-looking guidance from the central bank.
The three-day meeting started on Monday.
In
early May, the RBI, in a surprise off-cycle meeting, hiked the repo
rate, the rate at which the central bank lends short-term funds to banks
by 40 basis points (bps) to 4.40 per cent, amidst rising inflation
concerns in the economy.
In the same off-cycle meeting, the cash
reserve ratio was hiked by 50 basis points to 4.5 per cent essentially
to squeeze out some liquidity from the system.
India's retail
inflation accelerated to 7.79 per cent in April, remaining above the
tolerance limit of the central bank for a fourth month in a row. It is
highly likely that the retail inflation will remain above 6 per cent for
another few months.
Besides, wholesale inflation in the country
rose to 15.08 per cent in April 2022 from 14.55 percent in March, which
has been in double digit for over a year now.
Below are some of
the expectations by analysts, market observers, and real estate players
on the possible outcome of the ongoing monetary policy meeting:
Deepak Jasani, Head of Retail Research at HDFC Securities
MPC's
off-cycle policy meeting in May clearly pivoted its focus on inflation
over growth as a policy priority. The MPC is likely to increase the
benchmark repo rate in its ongoing monetary policy review as inflation
shows no signs of abatement.
The RBI is likely to follow a
nuanced and calibrated approach to rate hikes once it reaches its
pre-Covid neutral accommodation (5.15 per cent vs current 4.40 per
cent). We expect a 40 basis points rate hike in the upcoming policy meet
and see the RBI raising policy rates to 5.15 per cent by calendar year
end.
Any further rate hikes will be contingent on the inflation-growth dynamics and would be data dependent.
Hence,
equity markets and debt markets have for the most part discounted this
rate hike and market reaction would depend more on the statement of the
RBI Governor hinting about the future course of action.
Ashish Chaturmohta, Director, Research Group at JM Financial Services
India
is currently facing the heat of "imported inflation" owing to rising
crude prices, supply chain disruption and global liquidity absorption.
Hence,
to control the same, the government has played its role by reducing
petrol and diesel prices, bringing in restrictions for exports in order
to keep the domestic market stable etc, and on the other hand, the RBI
has been very proactive in their actions, which was clearly visible from
their 40 base points surprise rate hike.
It's been the first
time in the last several years that the RBI and the Government are both
working in a synchronised way. We believe the rate hike would be 30-40
basis points along with a stable outlook on the GDP.
Mohit Batra, Founder and CEO of MarketsMojo
The
RBI will try to tackle two issues in its upcoming monetary policy -
tackle inflation and ensure that the rupee does not depreciate too much
against the dollar. The last time when the RBI revised its inflation
target, crude was at $100 per barrel, and now it's trading at $120 per
barrel, suggesting a risk of inflation flaring up is high.
Keeping these facts like rupee depreciation and high inflation rate, I expect RBI to hike the interest rate by 50 basis points.
Satish Kumar, Research Analyst at Choice Broking
We
are estimating a repo rate hike of 40 basis points by the central bank
in the coming monetary policy to contain the inflation which rose to
8-year high of 7.8 per cent in April. Upside risks to inflation remain
elevated given the prevailing high crude oil and commodity prices amidst
supply side concerns.
Pushpender Singh, MD of JMS Group
The
outcome of the MPC meeting is pretty obvious, most probably leading to
an inevitable hike in the repo rate in lieu of a concerted effort to
lower the inflation rates, which perhaps is becoming a huge aberrant in
the growth parameters of the economy. I do not expect to see a massive
increase in the repo rate but definitely, a slight rise will be
announced to curb the dwindles and shift the radar of growth in the
right direction.
Aman Sharma, Director at Spaze Group
There
are great chances of a repo rate hike yet again in a bid to control the
inflationary rates that grow unabated despite direct attempts to stop
it. It has to be accepted with a pinch of salt by the industries across
the segments which will face teething troubles due to the probable hike
after the RBI's MPC meeting.
A surge in the repo rate is almost
certain, I do not think there will be a sharp insurgence but somewhat a
marginal increase to let the inflationary challenges deflate and the
numbers drop.
Mohit Nigam, Head, PMS, Hem Securities
The
repo rate is anticipated to be raised by another 40-50 basis points by
the MPC. This decision is influenced by rising price levels as a result
of ongoing geopolitical tensions and supply-chain pressures, which are
driving inflation higher. The primary goal of the RBI would be to keep
inflation under control and minimise its second-round impacts.
Inflationary
pressures on food and fuel remain high, and supply-chain disruptions
continue to put upward pressure on input costs. The biggest issue is
that if rates are raised further, urban demand, which was formerly a
major concern, may dwindle. Agricultural output will be supported by
favourable weather conditions, thus rural demand may not be affected as
much.
Ashish Khandelia, Founder of Certus Capital
We
expect the repo increase to be between 40-50 basis points in upcoming
MPC meeting with future increases leading to 5.75 per cent (where we
were exactly 3 years ago) or upwards by the end of FY23. 40 basis points
increase in May caused homes loans to move in to 7 per cent +/- range
from 6.5 per cent earlier.
And by the end of this financial
year, home loan rates will likely touch 8 per cent. This is unlikely to
derail the housing momentum, but it will certainly soften it. Coupled
with increasing prices, the growth may slow down a bit in FY23, after a
record FY22.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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