RBI Monetary Policy: The Reserve Bank of India hiked its key lending rate by 50 basis points
New Delhi:
The Reserve Bank of India’s benchmark repo rate was raised by 50 basis points today, the fourth straight increase in the current cycle, as policymakers extended their battle to tame sustained above-target retail inflation rate.
The monetary policy committee (MPC), comprising of three members from the RBI and three external members, raised the key lending rate or the repo rate to 5.90% with a five out of six majority.
The US Federal Reserve’s relentless and aggressive interest rate hikes over recent months have sent the rupee down sharply and prompted most economists to predict another 50 bps increase. The MPC has raised rates by a total 140 bps in the last three meetings, including consecutive 50 bps moves in the last two.
The annual retail inflation rate accelerated to 7% in August, driven by a surge in food prices, and has stayed above the RBI’s mandated 2-6% target band for eight consecutive months.
Here are all LIVE UPDATES RBI Monetary Policy:
Get NDTV UpdatesTurn on notifications to receive alerts as this story develops.
Just In| RBI hikes key lending rate by 50 basis points to 5.9%
Here are the highlights of RBI Governor Shaktikanta Das’ address:
- World in midst of third major shock from aggressive monetary tightening by central banks
- There is nervousness in financial market, global economy eye of new storm
- Indian economy continues to be resilient in midst of global turmoil
- RBI hikes benchmark lending rate by 50 basis points to 5.90 per cent
- RBI to remain focused on withdrawal of accommodative monetary policy
- Inflation expected to remain elevated at around 6% in second half of FY23
- Economic activity in India remains stable
- Recent correction in global crude oil prices if sustained may provide relief to inflation
- High frequency data for Q2 indicates economic activities remain resilient, private consumption picking up
- RBI cuts its economic growth projection for FY23 to 7% from earlier estimate of 7.2%
- Merchandise exports have been affected due to external factors
- Inflation projection for FY23 retained at 6.7% for FY23
- Bank credit has grown at accelerated pace of 16.2%
- Rupee movement orderly against US dollar; depreciated only 7.4% this year till Sep 28
- We remain confident of financing our external sector deficit
Sensex, Nifty Fall Ahead Of RBI Decision, Extend Losses For Eight Straight Days
Indian equity benchmarks extending their losing streak to eight days in a row, ahead of the Reserve Bank of India’s rate decision, as a deep-sell of in global stocks hurt investors driven by central banks’ hawkish rhetoric, concerns about a potential global recession, and rising geopolitical risk.
The BSE Sensex index declines 262.73 points to 56,147.23, and the broader NSE Nifty index falls 70.4 points to 16,747.70, mirroring a sea of red in Asian bourses.
RBI Certain To Raise Rates Today, But By How Much Is The Question
The Reserve Bank of India is all set to hike interest rates again on Friday, but expectations were divided on by how much, with 0.5 per cent the most likely outcome driven by elevated inflation, the US Federal Reserve’s aggressive stance, and a weakening rupee to new record lows repeatedly in recent days. Read more
RBI Heads For Its Third Half-Point Hike As Rupee Slumps To Record Lows
- India’s central bank is expected to increase its policy rate by half a point for the third time in a row as the currency’s plunge to a record low this month complicates the battle against inflation.
- The Reserve Bank of India’s six-member monetary policy committee will raise its repurchase rate by 50 basis points to 5.90 per cent, according to 24 of 35 economists surveyed by Bloomberg as of Wednesday. Ten forecast the rate will rise by 35 basis points to 5.75 per cent, while one sees a quarter-point increase.
- Governor Shaktikanta Das may opt to dial up his hawkish rhetoric on Friday from his tone at the August meeting when he pledged to do “whatever it takes” to cool inflation that has stayed above 6 per cent this year.
Hawkish Fed May Prompt RBI To Deliver A 0.50% Hike
- Interest rate hikes in the United States and the resultant pressure on the rupee is likely to give the Reserve Bank of India (RBI) reason to deliver a 50-basis-point rate hike on Friday even as it tries to protect a recovery in growth.
- The RBI’s monetary policy committee (MPC) has already hiked the key policy rate by 140 bps since May to 5.4%. Since the last policy meet, retail inflation has risen above 7% again and the rupee has weakened 9.5% on year, with pressure on the currency accelerating after the U.S. Federal Reserve’s meeting last week.
- “Shifts in the global policy environment have weakened sentiment considerably, which has been negative for currencies, complicating the policymakers’ inflation fight,” said Radhika Rao, senior economist at DBS Bank.
- “While rate sensitive flows are a small part of overall bond ownership, authorities will be keen to defend against spillover risks from global developments,” she added.
- The spread between Indian and U.S. 10-year bond yields touched a low of 360 basis points last week, its lowest since Sept 2009.
RBI To Raise Rates Again, But Economists Split On By How Much: Report
- The Reserve Bank of India is set to raise interest rates again next week with a slim majority of economists in a Reuters poll expecting a half-point hike and some others expecting a smaller 35 basis point rise.
- There was a wide consensus that the RBI will raise rates at the Sept. 30 meeting, although there were differences over how far it would go with inflation accelerating to 7% and with the rupee weakening.
- The RBI has lagged many of its global peers, despite inflation sticking above the top end of its target range of 2-6% all year. It has raised rates in three separate moves since May, one of them unscheduled, totalling 140 basis points and taking the key repo rate to 5.40%
RBI’s Panel To Start 3-Day Meet On Wednesday, Another Rate Hike Highly Likely
- The Reserve Bank’s rate-setting panel will start its 3-day deliberations on Wednesday amid expectations of yet another rate hike of 50 basis points to check high inflation, in line with similar actions taken by other major central banks, including the US Fed.
- Based on the recommendations of the Monetary Policy Committee (MPC), the RBI had effected 50 basis points increase in repo rate each in June and August after raising the short-term lending rate by 40 basis points in an off-cycle decision in May.
Better For RBI To Allow Rupee To Depreciate A Bit: SBI Report
It might be better for the Reserve Bank of India (RBI) to allow the rupee to depreciate a bit, letting it find its natural balance, said Soumya Kanti Ghosh in an SBI research report.
Rupee had been holding remarkably well with RBI intervention, however, the markets have performed much better, SBI Group Chief Economic Advisor Soumya Kanti Ghosh said in the research report.
RBI May Need To Replenish Forex Reserves As Rupee Falls Further: Report
- The Reserve Bank of India may need to find ways to replenish its foreign exchange reserves such as encouraging non-resident Indians to deposit more funds, as it looks to stabilise a depreciating rupee, HDFC Bank Chief Economist Abheek Barua said.
- The Indian currency has weakened 9.5 per cent so far this year, with the central bank defending the rupee via dollar sales that have depleted its forex reserves to $545 billion from the peak of $642 billion a year ago.
- “The central bank should intervene to ensure that a falling currency does not eclipse India’s fundamentals,” Mr Barua wrote in a note this week.
- While there might be some benefits of a depreciated currency in closing the trade gap, the damage to the capital account in terms of reduced confidence of investors will outweigh this benefit, he said.
- The Reserve Bank of India’s rate-setting panel on Wednesday began its three-day deliberations on the next bi-monthly monetary policy amid expectations of at least a 50-basis-point hike in the interest rate to check high inflation.
- If raised, it will be the fourth consecutive hike in the repo rate — the short-term rate at which the RBI lends money to banks.
- Headed by RBI Governor Shaktikanta Das, the Monetary Policy Committee (MPC) is scheduled to announce its decision today.
Source link: https://www.ndtv.com/business/rbi-monetary-policy-live-updates-rbi-certain-to-raise-rates-today-3390575