What experts said about RBI policy after rate hike to highest since 2019

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The Monetary Policy Committee (MPC) raised the key borrowing or repo rate to 5.40%.

Bengaluru:

The Reserve Bank of India’s key policy repo rate was raised by 50 basis points on Friday, the third rise in as many months as a way to cool stubbornly high inflation.

With retail inflation hitting 7% in June, economists polled by Reuters had expected another rate hike, but opinions were divided between a 25 bp move or a 50 bp hike.

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The Monetary Policy Committee (MPC) raised the key borrowing or repo rate to 5.40%. The interest on the Standing Deposit Facility and the interest on the Marginal Standing Facility were increased accordingly by the same amount to 5.15% and 5.65% respectively.

Commentary

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, Mumbai

“The decisions of the MPC were in line with our expectations. Given the growing imbalances in the external sector and the global uncertainties, it was necessary to take action in advance. We will continue to see a repo rate of 5.75% by December 2022. “

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Garima Kapoor, Economist, Institutional Equity, Elara Capital, Mumbai

“To curb inflationary pressures and anchor inflation expectations, the MPC raised the repo rate by 50 basis points and maintained its stance on withdrawing accommodation.”

“After today’s policy, we expect a further 25 basis points gain and expect MPC to become data dependent as it assesses the impact of recent increases on inflation. Amid signs of a spike from DXY and encouraged by the recent sharp correction in global commodity prices, we expect the rupee to remain supported in the fury of 79-80.5, even as high trade deficits remain a risk.”

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“As the risks of a global slowdown are priced in, 10-year yields are likely to fluctuate in the range of 7.15 to 7.35…along with movements in global yields.”

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