Reserve Bank of India Governor Shaktikanta Das said that Monetary Policy Committee (MPC) will retain its accommodative monetary policy stance at a time when globally inflation is rising alarmingly even as investment activity is showing some traction in the country
Headline retail inflation in India rose to a 17-month high in March led by a sharper than expected spike in prices of food and manufactured goods, official data showed. It has now remained over the RBI’s upper tolerance band of 6% for the third straight month
Investors became poorer by over Rs 6.27 lakh crore after the 30-share BSE benchmark Sensex tumbled 1,306.96 points or 2.29 per cent to settle at 55,669.03. During the day, it plummeted 1,474.39 points or 2.58 per cent to 55,501.60
Mumbai:
In a bid to check raging inflation, the Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday in an unscheduled meet said that the Monetary Policy Committee (MPC) unanimously voted to hike repo rates, the rate at which RBI lends to commercial banks, by 40 bps and Cash Reserve Ratio(CRR) by 50 bps whilst still remaining accommodative.
The MPC voted unanimously to increase the policy repo rate by 40 bps to 4.40% and CRR by 50 bps to 4.50 per cent with immediate effect. The standing deposit facility rate now stands at 4.15% while the marginal standing facility rate and bank rate stand at 4.65%.
Das said that MPC will retain its accommodative monetary policy stance at a time when globally inflation is rising alarmingly even as investment activity is showing some traction in the country.
Analysts have said that borrowers should prepare for an increasing EMI burden and FD investors can hope for better returns on new FDs. The economy may be witnessing the start of an interest rate hike cycle, they said.
Headline retail inflation in India rose to a 17-month high in March led by a sharper than expected spike in prices of food and manufactured goods, official data showed. It has now remained over the RBI’s upper tolerance band of 6% for the third straight month.
“The MPC continues to be accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward,” Das said.
India’s 10-Year benchmark bond yield was up at 7.41% after RBI raised its policy rate.
Home, auto and other loan EMIs are likely to increase after the RBI hiked its key interest rate by 40 bps in a surprise move on Wednesday in an effort to tame inflation that has remained stubbornly above target in recent months.
Investors became poorer by over Rs 6.27 lakh crore on Wednesday as markets crashed after the RBI hiked the policy rate by 40 bps in a surprise move.
The 30-share BSE benchmark Sensex tumbled 1,306.96 points or 2.29 per cent to settle at 55,669.03. During the day, it plummeted 1,474.39 points or 2.58 per cent to 55,501.60.
In tandem with the slump in equities, the market capitalisation of BSE-listed firms tumbled Rs 6,27,359.72 crore to stand at Rs 2,59,60,852.44 crore.
RBI’s repo rate hike accompanied by an increase in the cash reserve ratio was a ”double whammy” for the markets, and more such tightening moves can be expected from the central bank, analysts said on Wednesday.
Referring to the over 2 percent correction in the benchmark indices, Abhishek Goenka, chief executive of IFA Global, said there were ”bloodbath” inequities because of the ”double whammy” delivered by Governor Shaktikanta Das.
”The market was expecting a rate hike by RBI but at a slower pace,” he added, pointing to the discomfort on inflation as a key factor influencing the move.
Rahul Bajoria, Chief India Economist at British brokerage Barclays, said he expects the RBI to go for at least a 0.50 percent hike at the next scheduled meeting in early June to 4.90 percent, and take a breather only when it touches 5.15 percent.
”Looking ahead, given the hawkish rhetoric and high likelihood of an elevated inflation print for April, the RBI will be front-loading further hikes,” he noted.