INSUBCONTINENT EXCLUSIVE:
Five of the six members on the rate panel voted for a rate increase.Bengaluru: The Reserve Bank of India on Wednesday raised interest rates
for the second straight meeting, but retained its "neutral" stance as it aimed to contain inflation while not choking growth
The RBI's monetary policy committee raised the repo rate by 25 basis points to 6.50 per cent, in line with predictions by 37 of 63
economists in a Reuters poll last week
Five of the six members on the rate panel voted for a rate increase
The reverse repo rate was also raised by 25 basis points, to 6.25 per cent.Here's what experts say:ANAGHA DEODHAR, ECONOMIST, ICICI
SECURITIES"The hike was expected, but what is surprising is the stance has remained "neutral"
We were expecting that since this is the second consecutive hike in two policies, the stance would be changed to "tightening".They have not
quantified the impact of MSP (minimum support prices) on inflation, or when MSP will start affecting inflation - whether it will be in
October or earlier than that
I would have liked to see some clarity on that.We are expecting at least one more hike this financial year.I don't think rupee will be a key
factor in the Reserve Bank of India's rate decision because they have repeatedly said they do not target any specific value of rupee -
they just want to curb volatility.The high-frequency indicators show that growth has been pretty good - we expect Q1 growth to be between
7.6 per cent and 7.7 per cent
With the implementation of MSP hike, I expect H2 inflation will be higher than the initial forecast."SHASHANK MENDIRATTA, INDIA ECONOMIST,
ANZ BANK"The tone of policy seems slightly on the hawkish side despite RBI tinkering only marginally with its second-half inflation
The RBI continues to reiterate long-standing risks to inflation and in particular oil prices remain a key risk.HRA revision by the state
government is another item on the RBI's radar
A part of the MSP increase has already been incorporated by the RBI in June inflation projection, and the marginal increase in inflation
projection this time is due to higher than historical revision in MSP.The rupee will remain under pressure due to worsening domestic
fundamentals and capital outflows.The case for another hike is not off the table, there could be one in October."KUNAL SHAH, SENIOR VP FUND
I think what they have delivered is somewhat concluding the expected increase in inflation rather than the realised inflation because
realised inflation has been running lower than forecast
So, maybe some expectation of MSP (minimum support price)-related increase in inflation, and they want to pre-emptively be cautious and
deliver a rate hike, and that is what I think the market is expecting."Inflation continues to remain under control
Even today, the Reserve Bank of India has not revised its inflation forecast I think even the RBI is comfortable with the projected
inflation, but they are not comfortable with the unexpected rise in inflation so they just gave a pre-emptive hike, otherwise they could
have increased their inflation projections, which they have not done."DHANANJAY SINHA, HEAD OF INSTITUTIONAL RESEARCH, EMKAY GLOBAL
I think the rate hike decision is fairly justified based on the assessment of various factors which influence inflation.Also, we seem to be
clearly following the core inflation trend which is on the rising side which is good
The increase in commodity prices, the rupee depreciation, higher rural spending would all affect inflation.The rupee depreciation has
implications on inflation and liquidity in the money markets
However, right now, its impact on liquidity is larger and more relevant in terms of monetary policy decisions."LAKSHMI IYER, CIO (DEBT)
We maintain this is a shallow rate hike regime and no great reason at this juncture for back-to-back rate hikes."The rupee would be
vulnerable to developments on the global trade war front
Emerging market currencies are in general trending on the softer side, and hence, India may not be an exception
Hike in rates should provide near term support to INR given the massive depreciation year-to-date in 2018."Next few readings on CPI likely
Given vulnerable commodity prices, we don't expect major negative surprises on the inflation front
