Even as the retail inflation seems to have come under control after remaining over 6 per cent in most of 2022, the RBI MPC has kept the key repo rate unchanged at 6.5 per cent for the second time in a row. In April 2023 policy also, the RBI had kept the repo unchanged.
Nilesh Shah, managing director of Kotak Mahindra Asset Management Company, said, “The RBI is reminding of the greatest opening batsman Sunil Gavaskar. Standing without fear in front of a challenging global environment. Taking a fresh stance after scoring a century on a challenging wicket to reassure everyone that Mai Hoon Na.”
He added that the Indian economy is ideally balanced between growth and inflation under the RBI’s navigation. Markets will be pleasantly surprised if the GDP growth for FY 24 comes as per the expectations of the RBI at 6.5 per cent.
The RBI MPC on Thursday unanimously decided to keep the key repo rate unchanged at 6.50 per cent, in line with market expectations. The monetary policy stance is maintained at ‘Withdrawal of Accommodation’ with the MPC voting in favour of this in the ratio of 5:1.
Amar Ambani, head (institutional equities) at Yes Securities, said, “Quite expectedly, the RBI kept the repo rate unchanged, citing that it needs time to assess the lag impact of the cumulative 250 bps rate hikes, while the inflation trajectory has favourably turned south. Monetary tightening has been paused and we believe it is the end of the rate hike cycle.”
The central bank maintained its stance on the withdrawal of accommodation. “We expected a status quo on the stance, as the world central bankers are still raising rates, even if they are at their fag end of rate hikes too. The global situation is also a precarious one and the RBI will want to observe for a while,” he said.
Ambani said the RBI will manage liquidity in a calibrated manner, characterised by variable repo and reverse repo operations, whenever the need arises.
Industry body ASSOCHAM said the RBI decision to keep the benchmark interest rates unchanged at 6.5 per cent is on the expected lines, and the focus of the monetary policy is clearly on further taming inflation for a stable growth.
“‘While the Monetary Policy Committee remains focussed on withdrawal of accommodation to further rein in inflation, we are confident that the RBI would ensure that adequate liquidity is maintained in the banking system and credit growth remains robust,” ASSOCHAM Secretary General Deepak Sood said.
On the inflation forecast, the RBI on Thursday also revised downwards CPI inflation projection for FY24 at 5.1 per cent, against 5.2 per cent earlier.
Prasenjit Basu, chief economist at ICICI Securities, said, “No surprise that the MPC has left interest rates unchanged. We expect CPI inflation to remain below 5 per cent for several months, and the “withdrawal of accommodation” stance to be altered by August. The next policy move is likely to be a rate cut once it is clear that the inflation fight has been won decisively.”
Niranjan Hiranandani, national vice-chairman of NAREDCO, said, “As a snowball effect, respite in homeloan interest rate will augur well to fuel uptick in housing sales across the segments.”
He added that discerning homebuyers should now avail the benefits of cooling inflation, stable home loan rates, conducive real estate market dynamics in the backdrop of buoyancy in GDP growth, domestic demand and availability of sufficient liquidity. With the festive season in tailwinds, a hiatus in interest rate hike will act as a growth catalyst and boost sales velocity.
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