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RBI has increased the repo rate by 25 bps to 6.50% with immediate effect. The current hike is in line with the expectations and comparatively lower than the previous rate hikes.
“The MPC is of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, break core inflation persistence and thereby strengthen medium-term growth prospects. Accordingly, the MPC decided to increase the policy repo rate by 25 basis points to 6.50 per cent”, said RBI in a press release.
It added, “The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.”
What do industry experts say?
10-year bond yields likely to remain range bound between 7.20-7.40% - Mahendra Jajoo, CIO, Fixed Income, Mirae Asset MF
While the 10-year Government bond yields ticked up by 3-4 bps as an immediate reaction, they are expected to largely remain range bound in current band of 7.20-7.40 for the time being. Short term rates are likely to move higher in line with adjustment in policy rates.
In line with expectations - Nilesh Shah, Managing Director, Kotak MF
This policy is as per the expectations where the RBI has erred on the side of caution by raising repo rate by 25 bps to ensure inflation remains contained. The introduction of lending and borrowing in Gilts will even out volatility in liquidity which is becoming tighter.
Expect this to be the last hike in this cycle - Rajeev Radhakrishnan, CIO - Fixed Income, SBI MF
We expect that this hike would be last in this cycle, with incremental actions to modulate excess liquidity. The lag effect of earlier actions and the cumulative monetary and liquidity tightening should enable policy rates to stay on hold incrementally. The FY24 GDP estimates which are in alignment with the Budget numbers probably remains on the higher side that could be re assessed as we move forward.
