ShreeMetalPrices: Reserve Bank of India increase Repo Rates by 50 BPS to 5.9%,In FY23 RBI Rate to be anticipated by 6.4% up to 60 BPS in the Upcoming Months.

Reserve Bank of India Interest Rates Hike

The repo rate was increase by 50 basis points to 5.9% on Friday by the Monetary Policy Committee (MPC) of the Reserve Bank of India. The central bank also maintained its position that it will keep its attention on the withdrawal of accommodation. The rate is in line with forecasts because the majority of economists and market analysts. They had predicted that the Reserve Bank of India will front-load rate increases in an effort to contain inflation,. Which has above the Reserve Bank of India tolerance threshold of 6% for eight straight months. At its subsequent MPC meeting, the central bank is anticipate to announce another rate increase. By the end of FY23, economists expect the terminal repo rate to be 6.25-6.40%. According to many Economists, The Indian government and RBI are managing the economy more better than their big international counterparts. Read More

According to Naveen Kulkarni, Chief Investment Officer, Axis Securities. The Reserve Bank of India repo rate of 50 bps in line with forecasts given that core inflation sticky,. There were unfavorable global economic conditions, and the Indian rupee weakening versus the dollar. The Reserve Bank of India hasn’t change its forecast for inflation for FY23, and respite won’t be felt until Q4 at the earliest. Additionally, it reduced its FY23 growth projections to 7%. We believe most banks, particularly those with a bigger proportion of the floating rate, will be better position in the increasing interest rate environment because the RBI data indicates strong loan growth, which is now at a multi-year high. But the slow deposit growth continues to be a problem.

MPC Meetings.

The Reserve Bank of India RBI will continue to be forced to front-load interest rates in the upcoming MPC meetings. Despite the fact that India is in a better position than many of its international peers, with domestic indicators showing continuous improvement. Global factors like the ECB and US Fed’s indication of steeper rate hikes in the coming policies, he said.

By the conclusion of FY23, the terminal repo rate is probably 6.25-6.40%.

According to RBI governor Shaktikanta Das, Despite a challenging international environment, economic growth has remained resilient. The recent swift depreciation of the rupee may have influenced members’ decisions in favour of greater rate increases, addressing the external sector imbalance and lowering the interest rate differential. Overall the policy statement was cautious and contained no unpleasant shocks as evidenced by the effect it had on the 10 year yield and the stock markets. We anticipate that the terminal repo rate would be between 6.25 and 6.40% by the end of FY23, thus the next phase of the reaction may be calibrat.

Possibility of Further Reducing the Excess Liquidity.

The reaction of the markets—stocks, bonds, and currency—and the RBI policies were more or less in accordance with what was anticipated.

According to Madan Sabnavis, Chief Economist at the Bank of Baroda, given the remarks made in the speech. One can anticipate a further 50-60 basis point hike in rates in the upcoming months. Which might raise the terminal rate to 6.4-6.5%. He continued,. “RBI does appear to be more confident on growth, where the target has been lower slightly which appears to be more due to statistical reasons. High inflation will be the main driving factor as there are some upside risks to the number of 6.7% due to developments on the agricultural side.”

“All of the high frequency indicators indicate that this year’s growth will be stable with no potential for decline. The continued withdrawal of accommodation indicates that there is room to reduce the excess liquidity in the system even further. The RBI has combined the 14 and 28 day variable rate reverse repo auctions in an effort to prevent increases in money market rates caused by liquidity being locked in for an extended period of time. Sabnavis tacked on.

Policy-neutral and prepared to respond to incoming data from both domestic and international sources

RBI Managing the Economy

The main worries appear to be caused by international issues, and to a lesser extent, by internal events. According to Lakshmi Iyer, Chief Investment Officer (Debt) & Head Products, Kotak Mahindra Asset Management Company. The RBI is also aware of currency movements given the strength of the USD. “We see the policy as impartial and prepared to respond to incoming data, both domestically and globally. In the short term, bond rates may see some respite purchasing. But future direction will be keenly watch in relation to global yields, particularly UST. The likelihood of India bonds being include in the Index. Which may not happen anytime soon, would also have an impact on bond markets, she added.

RBI and the government are doing a much better job managing the economy than their big international competitors.

According to Siddarth Bhamre, Head of Research at Religare Broking Ltd., The RBI Governor’s assurance that the GDP growth rate for FY23 will remain at 7% gives rise to hope that India may continue to outperform other economies despite the difficult global economic climate. The picture is not dire, despite RBI Govt noting the FED’s fast increase in interest rates as a third shock following COVID and the Ukraine crisis. Despite the MPC’s withdrawalist posture, Bhamre continued. “Inflation and interest rates data then and today indicate that its policy is still accommodating. Which allows greater room for subsequent hikes in interest rates with less impact on GDP.” Positively, Michael Patra, deputy governor of the RBI, said. That “soft-landing is for the established economies, for India it’s a take-off.” We think the government and RBI are managing the economy much better than their significant international competitors. stated Bhamre.